Questions tagged [cap]

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268 views

A well known broker quotes cap/floors as spot premium for ATM straddles but forward premium for the skew, given that the difference between spot premium and forward premium is that the option is not ...
111 views

Which expiry interpolation method for caplet/floorlet surfaces?

I want to bootstrap an (implied volatility) caplet/floorlet surface from quoted cap/floor volatilities on a fixed strike grid. I'm thinking about either using a left-continuous or a linear ...
332 views

Python Quantlib for the calibration of interest rate caps

I am trying to calibrate the G2++ model to interest rate caps using the Quantlib library in Python. I have the problem that my optimization always stops with the starting values. So probably either my ...
• 55
80 views

ATM cap prices in Vasicek model (Filipovic)

I am trying to replicate the ATM cap prices in table 7.1 (see bottom of this post) from Filipovic's book "Term Structure Models - A Graduate Course" which assume the Vasicek model and uses ...
• 558
1 vote
2k views

What are "greeks" in general for non-standard options (swaptions, capfloors, etc)

I know what greeks are for standard options: just take the derivative with respect to some parameter, like spot, time, rate, etc. But how does one calculate greeks for swaptions and capfloors? I was ...
1 vote
186 views

Quantlib - bond with capped coupons

Using QuantLib I want to price a Floating rate bond whose coupons are capped at some rate. I understand I could price the coupon caps separately and then add that to a zero-bond. However, I've noticed ...
• 209
1 vote
904 views

How to build a volatility surface for caps from the SABR model?

My end goal is to build a volatility surface for caps. It's well known that SABR model has Hagan approximation formulas for log-normal and normal implied volatilities of options, e.g. caplets, ...
• 834
1 vote
610 views

What is the correct implied volatility to use when valuing an FRA option?

To my understanding the value of an FRA option is identical to that of a caplet of equal maturity, strike and tenor. A volatility surface of cap implied volatilities is generally available, and from ...
• 902
1 vote
484 views

Greeks of caps,floors and swaptions

I will have an interview for a junior position as interest rates volatility trader. I would like ask you some questions about greeks of caps floors and swaptions. Are Caps vega positive? Are floors ...
• 11
857 views

Delta and vega sensitivities for Cap

I have a task to do but it is very difficult.. I have to calculate the: Delta Sensitivity analytically, that is the first derivative of caplet price wrt the forward rate, using the black model to ...
• 11
56 views

cap/floor valuation in a hypothetical scenario using monte carlo simulation

How can I do a cap/floor valuation in a hypothetical scenario using monte carlo simulations of some interest rate model? My conditions: (For example) I want to do valuation of a cap option under a ...
413 views

How to price an inflation caplet/floorlet using Bachelier Formula?

I am trying to recalculate the prices of inflation cap in order to calibrate a SABR model. I have this table which gives me the normal volatilities values in % for the different strikes and different ...
• 21
158 views

LIBOR-in-arrears swap

Let's say we have a situation where all 12-month LIBOR forward rates at 8% per annum with annual compounding. All cap volatilities are 16%. Estimates the difference between the way a sophisticated ...
416 views

Should one calibrate SABR model on caps or caplets?

I want to build a volatility surface for caps on a 3M index implied from SABR model. I have a set of cap normal volatilities for a range of strikes (4%, 6%, 8%, 10% and ATM) and maturities (1, 2, 3, 4 ...
• 834