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Adapt SABR Hagan/Obloj model from swaptions to treasuries options

I am a young intern in a brokerage company and I am currently working on developing a new pricer. I would like to encode a skew-visualisation tool and the best way that appeared to me is the SABR ...
Leos's user avatar
  • 11
1 vote
1 answer
284 views

The shape of the volatility smile for bimodal outcome

Let's say that we have a biotech company that awaits FDA approval. In the case of approval the company gets a cash injection and in the case of denial it is pretty much bankrupt. Clearly, this is a ...
HJA24's user avatar
  • 45
2 votes
1 answer
726 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 ...
Ussu's user avatar
  • 585
2 votes
1 answer
2k views

How does the volatility skew/smile relate to hedging/trading vanilla contracts?

I know that obtaining and calibrating the smile is important in the hedging and trading of exotics since we use vanillas to hedge and price exotics. How is the smile important in the hedging and ...
roz's user avatar
  • 989
2 votes
0 answers
128 views

stochastic volatility and smile

Can we say that the volatility smile contain for sure stochastic volatility information ? If yes why ? Saying that BlackScholes does not explain the smile does not necessary mean there is an ...
glork's user avatar
  • 617