Questions tagged [caplet]

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Caplet stripping in the bwd-looking RFR world with/without maturity adjustment

Since the beginning of this year, LIBOR rates have ceased in some markets like GBP, CHF, and JPY and rates pricing has moved into the RFR space, using compounded overnight rates as the underlying for ...
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Implied volatility surface of an average rate Asian caps

Lets say I have a SABR model where implied volatility is given by semi-analytical Hagan et al. formulas and individual caplets are priced with analytical Black formulas. This model allows me to ...
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1 vote
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Which Model Should I Use for Pricing USD Interest Rate Caps (7, 10, 30 year maturities) on 1Month Rates?

I am trying to price USD interest rate caps on 1M rates (e.g., LIBOR, SOFR, etc.). The caps are designed to limit the exposure on non-callable USD Pay Float / Receive fixed positions in interest rate ...
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1 answer
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Caplet delta hedging

I have had a really hard time trying to simulate the delta hedging of a caplet. When I compare the process to delta hedging a call on a stock (which I already did without much trouble), I found some ...
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QuantLib Python - stripped caplet volatilities as input

My market data source provides me with already stripped caplet volatilities as a matrix with strikes in one dimension and caplet maturities in the other dimension. Is there any way to put these caplet ...
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1 answer
127 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 ...
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2 votes
2 answers
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Where can I find caplet implied volatility data?

I am looking for caplet implied volatility data for Libor-EUR. Is there any online data base etc. available to get such data? Does ...
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2 votes
1 answer
86 views

Show that the price of a LIBOR rate paid in advance is a linear combination of caplets

Let $L(t, T_1, T_2)$ be the forward LIBOR rate at time $t$ for the period $T_1$ to $T_2$. If a security pays some multiple of $L(T_1, T_1, T_2)$ at time $T_1$, how can we show that the price of this ...
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4 votes
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125 views

IR Cap Forward Premium

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 ...
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1 vote
1 answer
120 views

What is the correct volatility to use for inverting Black76?

I'm using VCUB on Bloomberg for ATM cap volatilities and have noticed there are a few "flavors" of volatilities. I would like simply use ATM flat vols to bootstrap forward volatilities from ...
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Where can (current) interest rate cap prices be found?

I'm somewhat new to interest rate models and am interested in obtaining ATM cap prices and volatilities for calibration purposes (Black-Derman-Toy, Hull-White, etc.). Ideally, this would enable me to ...
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4 votes
1 answer
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Forward starting zero-coupon bonds

We trivially have that: $$\frac{Z(t_0,t_1)}{Z(t_0,t_2)}=1+\tau L(t_0,t_1,t_2)$$ Where $L(t_0,t_1,t_2)$ is the forward Libor between $t_1$ and $t_2$, as of $t_0$. Simply inverting this relationship ...
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1 answer
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Quantlib error initializing CapFloor C++ Class

I'd like to use QuantLib as a C++ library to price interest rate derivatives, in particular Cap&Floors. To semplify things a little, let's say I have a vector of EURLibor1Y rates for different ...
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6 votes
2 answers
609 views

Caplet "in arrears" pricing formula

The forward Libor rate $L(t,t_1,t_2)$, with $0 \leq t \leq t_1$, must be a martingale under the T-forward measure associated with the zero coupon bond $P(t,t_2)$ that matures at time $t_2$. Pricing a ...
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Where to find Caps/Floor historical data?

I'm trying to calibrate the Lognormal Forward Libor Model to market data, in order to calculate market implied volatilities. However, I'm having some troubles finding any Cap/Floor historic price. Not ...
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1 vote
1 answer
328 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 ...
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