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I am wondering if there are any approximations that exist to convert yield vol to price vol? I am dealing options on SOFR futures, which can be quoted in yield and price (i.e. 3% put and $97 call are the same). There are some old threads about this but the answers were not great. Yield vol is typically quoted via black for these while price vol is quoted normal. I am aware of Hagan's transform for approximating normal given black price vol, however if given black yield vol I am not sure how to convert this to black price vol. Any tips or help would be appreciated.

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  • $\begingroup$ Are you sure price vol is Normal and yield vol is Black? Intuitively, that makes little sense because price cannot go negative whereas yield can. I am not at work today but I think for Black it is just $price \ vol = yield * yield \ vol * risk / underlying \ Price$. Will check tomorrow if I have time. $\endgroup$
    – AKdemy
    Nov 20, 2023 at 20:22
  • $\begingroup$ I don't really mean that they have to be either or, I am more just referring to how they are quoted, and am more concerned overall with the approximation going from yield to price (whether we are normal or black makes little difference to me). But for example, go to SFRZ4 97.00 Comdty OVME, and using QuantLib I can solve for normal implied to match very closely to BBG (using price vol conventions for strike/fwd/side), and I can solve for black implied the same way and get very close to BBG (using yield vol conventions for strike/fwd/side). $\endgroup$ Nov 20, 2023 at 22:08
  • $\begingroup$ In case anyone reads above it should be SFRZ4C 97.00 Comdty OVME $\endgroup$ Nov 21, 2023 at 2:46

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