Questions tagged [extrapolation]

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American ImpVol Surface w/ DIVs - Is there any method that works in 2020?

Goal is simply to retrieve, from market quote data, the Implied volatility smiles and vol surface for American Options on US Equities (Calls & PUTS). Have not found a reliable way to do this, this ...
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0answers
18 views

How can I extrapolate a Smile curve of Maturity T for a longer maturity T+1>T

I have a interpolated vol smile curve for maturity 2 years and I would like to extrapolate it to a 5 years.
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1answer
121 views

Extrapolate Implied Volatility Surface

I have a moneynessratio-tenor volatility surface and want to extrapolate the implied volatility for moneynessratios > 150%. The volatility surface was downloaded for different points in time, so I ...
1
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0answers
60 views

FX Smile Curve Extrapolation

How a smooth smile curve is generated from 5 smile points : 10D RR, 25D RR, 10D SM, 25D SM and ATM? What are the commonly used extrapolation and interpolation techniques? I have seen people ...
2
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1answer
125 views

FX smile extrapolation

Typically, 5 points data is available for smile construction : 25D RR, 25D SM, 10D RR, 10D SM and ATM. Questions: 1. How is a smooth smile curve generated with the help of these? 2. How is ...
0
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1answer
67 views

Raw interpolation when the desired term is out of the know originals

I was reading this paper regarding the yield curve construction and was programming the Raw Interpolation algorithm (page 7 equation 6) however I was wondering how to use the formula when the desired ...
1
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3answers
159 views

What's a reasonable way to extrapolate a bond curve?

I have a corporate bond curve which stops at 15 year maturity. I want to extrapolate the curve to 25 year maturity. I'm looking for a reasonable approach, not necessarily deeply technical. Thanks ...
1
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1answer
404 views

Quantlib | Issue with extrapolation in BlackVarianceSurface

I have created BlackVarianceSurface and enabled extrapolation but unable to change extrapolation type used. It is giving flat extrapolation. Used setInterpolation to change method type but ...
6
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1answer
432 views

Extrapolating SVI

In his paper Gatheral presents the following parametrization of the implied total variance $w(k,T) = \sigma_{BS}(k,T)^2T$ $$ w(k) = a + b\{\rho (k-m) + \sqrt{(k-m)^2 + \sigma^2} \}.$$ Assuming that ...
2
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1answer
135 views

Quick way to extrapolate call price as function of strike

Let's say I know the price of a call for two different values of strike. Is there a quick way to guess the price for another value of strike ? Actually, I know that C(100)=15 and C(90)=20 and I have ...
3
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3answers
1k views

Interpolating probabilities of default

I have a table of cumulative probabilities of default of industrial bonds, in time and credit rating. It is similar to S&P whitepaper here. Basically, it looks like this (sample numbers): ...
10
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2answers
713 views

Extrapolating implied volatilities to small time

Could anyone please direct me to literature or methods for extrapolating the implied volatility surface towards small expiry? I'm looking to price very short time to expiry binary options (e.g. 5 ...
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1answer
931 views

Zero Curve Calculation for AUD, CAD (post LIBOR scandal)

In the end of May 2013 British Bankers Association (BBA) stopped publishing LIBOR rates for Australian and Canadian dollars in a light of recent scandals. LIBOR rates were essential for creating zero ...
13
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1answer
2k views

Bond curve extrapolation

What are the best methods to extrapolate bond yields from an existing curve that doesn't extend quite this far? For example, how would one come about finding a theoretical bond yield for a 40 or 50 ...