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Questions tagged [black76]

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0answers
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How to price equity options using a Black76 implied volatility surface?

I would like to calculate the fair value of american and european options on various equities and indices using QuantLib C++. Since I do have discrete dividends available for most underlyings, I use <...
2
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1answer
271 views

1y10y vs. 10y1y Swaption

Say you have two identical payer swaptions, exception for their terms and tenors. In other words, suppose you have two payer swaptions: $1y10y$ and $10y1y$. All other things being equal, according ...
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1answer
301 views

Obtaining swaption prices from lognormal volatility quotes

I am working with the following dataset from quandl: https://www.quandl.com/databases/CSWO (I'm using the sample dataset only). My question is how to obtain the swaption prices from the quotes given. ...
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1answer
89 views

Black 1976 caplet value

I've seen from two sources different formulas for the caplet value (Black 1976): $$Caplet_1 = N\cdot DiscountFactor_{0,k}\cdot yrFrcn_{k,k+1}\cdot [F_{k,k+1}\cdot N(d_1) - R_k\cdot N(d_2)]$$ $$ ...
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1answer
645 views

Black-Scholes vs Black equation

Why is Black used for interest rate options pricing instead of Black-Scholes? Why are we more interested in Future rates instead of Spot rates when it comes to interest rate options? Basically, why ...
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1answer
125 views

Use of Historical Volatility in Black 76 Model

I am trying to use the Black 76 model to calculate the price of a bond option. Is it possible to use the historical volatility of the bond prices (say standard deviation of the log returns over the ...
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1answer
246 views

Pricing and Hedging an Option through a Currency Triangle

How is the option price of an plain vanilla option (in a Black Scholes setting) derived, which is written on, say XAGGBP but practically hedged with XAGUSD and GBPUSD (because these are more liquid)? ...
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1answer
112 views

FX Option Pricing Under Basis Adjustment

Given money market rates such as USD LIBOR and EURIBOR and in the context of FX options valuation, I have been reading about the importance to include a so called basis adjustment to one of the ...
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116 views

Black's model and Monte Carlo

It is well know that one uses the Black 76 model to price commodity derivatives. I would however like to perform a Monte Carlo simulation that ties back to this number. How would one go about this ...
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1answer
479 views

Which models do Bloomberg/Reuters use to derive implied volatility for interest rate derivatives with negative forward rates?

can anybody tell me which models Bloomberg and Reuters ares using to derive implied volatility for interest derivatives with negative forward rates? I know that Black-76 is the standard model, and ...
0
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1answer
58 views

Relation between Libor market model and Black76 with time-dependent vola

The Black76 model uses a lognormal process to model the forward rate $L_1(t)$ from $T_1$ to $T_2$ at time $t$, $$dL_1(t) \ = \ \mu(t) L_1(t) dt + \sigma(t) L_1(t) dW_t$$ By switching to the $T_2$-...
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1answer
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Why is the Black 76 model not considered an interest rate model?

The Black 76 model is one of the standard models for interest rate derivatives like pricing caps, floors, swaptions, etc. The Black 76 model is given as $$dF_t = \sigma F_t dW_t$$ so it models the ...
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1answer
78 views

Premium result with BlackProcess not in line with online engines

I'm trying to implement BlackProcess with Quantlib (in C#) and the result I get for NPV() is not inline with some resources I can find online. Here is my code: ...
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1answer
155 views

Why is there an upper limit on the premium of an ATM (!) call swaption in the Black76 model?

Trying to imply Black76 (where the forward swap rate is log-normal) volatilities as Bloomberg does in their VCUB screen we see holes at two regions: at short maturities due to negative rates which ...
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1answer
436 views

Valuation of option on amortized IR swap

I'm currently valuing swaptions using an implied volatility surface and Black's formula. This formula is given by $$A (S\Phi(d_+) - K \Phi(d_-))$$ where $$ d_{\pm} = \frac{\log\left(S/K\right) \pm \...
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3answers
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How do we know if the volatility which is quoted in market is Normal (Bachelier model) or log normal (Black 76)?

In markets, many instruments are quoted in volatility, but how we can tell what kind of volatility is this? Is it normal volatility, or lognormal volatility. because it affect our hedging positions. ...
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1answer
57 views

Likelihood of a caplet ending in the money

with what likelihood would one expect an ATM caplet to end up in the money? Just as a very rough guess, from real world experience. When I consider N(d2) from the Black formula, for spot = strike = 4%...
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2answers
1k views

good R package for vectorized option pricing

I am using for now the package fOptions but it doesn't allow for vectorized computation of black76 prices and delta. Which package can be used to do that? As noted ...
5
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1answer
128 views

BlackProcess' constructor $x_{0}$ argument in QuantLib

I am currently using BlackProcess to price options and I have a doubt related to the $x_{0}$ argument of the constructor: I've figured out it should be the forward ...
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1answer
1k views

What is the Rho of an option on a futures contract priced using the Black 76 model?

I wanted to quickly confirm some simple calculations for the Black 76 greeks and was making use of the formulas on this website: http://riskencyclopedia.com/articles/black_1976/ I have an issue with ...