Questions tagged [caplet]

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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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47 views

Interest Rates Options: can't reproduce market premiums given volatilities and discount curve

I have a range of premiums and normal (Bachelier) volatilites quotes across several strikes and maturities for caps and floors and trying to figure out why I cannot reprice them given the discount ...
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1answer
131 views

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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30 views

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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50 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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92 views

Does my caplet stripped volatility surface make any sense?

My goal is 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, ...
2
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2answers
523 views

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 ...
2
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1answer
82 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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111 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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1answer
87 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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43 views

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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1answer
166 views

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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1answer
54 views

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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2answers
495 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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0answers
25 views

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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1answer
227 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 ...