Questions tagged [swaption]

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39 views

Carry on a USD 6m10y payer swaption

Trying to calcuate the carry on a 6m10y payer swaption. So far, I have used: carry = spot rate - libor Do I use the 6m LIBOR rate (0.15213%)? And do I just use the 10y yield for the spot rate (1.26)? ...
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50 views

Delta hedge swaption straddle

Let's say you decide to buy a 2Y10Y ATM swaption straddle (i.e. buy 10 million ATM payer swaption and buy 10 million ATM receiver swaption). In order to delta hedge, I believe you would short the ...
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1answer
71 views

Sabr vs Heston for IR swaptions

Why is SABR considered the model of choice for swaptions? Is the Heston model not suitable? Does Heston produce unrealistic dynamics with respect to the swaption market?
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0answers
59 views

Swaption Terminology

What does 5y10y200 WC mean? Further, what does 2y10y WS mean? I know the first digit (5 or 2) means that the swaption starts in 5 or 2 years time, and the second digit shows how long the exchange ...
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37 views

Swap Fly PnL Payoff Question

Stuck on this payoff question. What is the PnL on 5s10s30s on a swap fly 10k 01, where the fly moves 8 to 26bp? Any ideas would be much appreciated.
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1answer
96 views

Free Arbitrage conditions in ATM swaption surfaces

I'm wondering how can we check free arbitrage conditions in ATM swaptions surfaces since we only have access to Expiry, Tenor and volatility? Can someone help me please, i didn't find any article ...
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1answer
113 views

What is the definition of “co-terminal swaptions”? why they are important in the calibration process?

could anyone help me understand the definition of "co-terminal" swaptions? What are they? Can you provide an example to illustrate? And why such instruments are important in model ...
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1answer
221 views

Bermudan Swaptions - Payer vs. Receiver (LGM)

There is abundant literature discussing the pricing of Bermudan swaptions and the relevance of single-factor Markov-functional models (e.g. LGM) versus multi-factor market models (e.g. LMM). From a ...
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2answers
139 views

Calibrate Hull-white one factor model with swaption in analytical formula

I've been trying to calibrate Hull-white one factor model with swaption but I have a trouble making closed form solution of swaption Below is the part of paper I've been referencing to https://people....
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108 views

Rebonatos's formula in C++

I'm trying to code in C++ Rebonato's formula for swaption volatilities $$ v_{\alpha,\beta}^2=\frac{1}{T_\alpha} \sum_{i,j=\alpha+1}^{\beta} \frac{w_i(0)w_j(0)F_i(0)F_j(0)}{S_{\alpha\beta}^2(0)}\rho_{i,...
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0answers
64 views

Swaption extrapolation

I have some ATM swaption volatilities with the following characteristics: (-IBOR) payment frequency: 1M Underlying swap maturities (tail): 1Y, 2Y, 5Y, 10Y, 15Y and 20Y Swaption expiries: 1M, 3M, 6M, ...
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66 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 ...
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28 views

Swaption model giving flat bachelier implied curve

I am working on interest rate models and was curious to Know if there exists a model giving a constant surface of implied volatilities. The implied volatiliy is taken as a normal (bachelier) ...
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42 views

Free swaps/swaptions data

I would like to play around a bit with some yield curve models. I am looking for a way to get a hold of free swaps/swaptions data. Obviously, the quality does not have to be super good, I am merely ...
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3answers
518 views

Trading desk assumes zero percent discount rate?

All the swaption and option models I have encountered at my employer's trading desks have assumed a zero percent discount rate. I have proposed using the LIBOR curve, but management responded that &...
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1answer
160 views

Swaption on Forward-Starting Swap “Replication”?

Lately I was thinking about forward-starting swaptions vs. options on forward-starting swaps a bit, and I started wondering about the following: Suppose we are at time $T_0$ (today) and we want to ...
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89 views

How to interpolate implied swaption volatilities between maturities for SABR?

I want to interpolate the swaption volatility surface (fixed tenor) in the maturity dimension. I have volatility smiles at times T1 and T2, and would like to get the smile at time T with T1<T<T2 ...
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1answer
105 views

Swaption decomposition - forward options and option on options

I am following through the book "An Introduction to Financial Derivatives" by Salih Neftci. According to the book, a swap can be decomposed into cash flows from forwards and options. I am ...
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1answer
605 views

Volatility adjustment for SOFR/OIS caplet referencing LIBOR vol

Suppose that today the price of a 3m LIBOR caplet with 6m expiry has been calibrated with a particular implied volatility. How would one go about thinking about an adjustment to that volatility to ...
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2answers
684 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 ...
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0answers
150 views

Hull white model calibration - constant mean reverse factor and sigma

I setup a HW 1F model using Monte Carlo simulation with constant mean reversion and volatility factors. When I calibrate to a series of swaptions ( 1x4yr;2x3yr;3x2yr;4x1yr),the last three swaption ...
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28 views

What is the meaning of these parameters in the Valuation class?

I am studying the valuation engine for a typical IR Swaption named G2SwaptionEngine. The class reference is available in : https:...
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1answer
84 views

Replication of European swaption

Suppose we have a European payer swaption with 5-year maturity and 10-year tenor. The underlying is clearly the 10-year tenor payer swap. Does it mean that to replicate the swaption I need to ...
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1answer
520 views

Instrument valuation using Monte Carlo simulation with Quantlib

I am looking for some example to value an American swaption using monte carlo simulation of ...
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44 views

VolCube in RQuantLib

Working with RQuantLib for the first time and trying to understand how the Swaption Vol Cube is being built. I am looking at volCF2CubeK.R file and my general understanding is that we are collecting ...
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1answer
318 views

Pricing Swaption Analytically using Libor Market Model

I was asked the following question in a recent interview: "(i) Express a forward swap rate in terms of forward Libor rates. (ii) Apply Ito's lemma to this expression to derive the process for the ...
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1answer
405 views

QuantLib Swaption Vol Cube

I am currently trying to price swaptions under QuantLib/Python using a volatility cube using ql.SwaptoinVolCube2. From the documentation: ...
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3answers
454 views

Which measure is used to price a swap?

When we value the floating leg of a standard vanilla swap, we replace the expectation of the future floating rates by the forward rates known today. However my understanding is that the forward rate ...
3
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2answers
332 views

RFR discounting - swaption compensation

Later this month the discount rate for EUR interest rate instruments changes from Eonia to EuroSTR. In October SOFR replaces EFFR. These changes will affect the value of uncleared swaptions and ...
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1answer
255 views

Historical PNL using Taylor Expansion for Gamma Ladders

I have DV01 and Gamma Ladder for IR Swaptions and the historical market data of the underlying swap curve. Can someone please help me understand how to calculate historical PNL using taylor expansion ...
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39 views

Black model with negative strike price

Whats the issue if we try to price a swaption with a negative strike using Black model?
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1answer
132 views

Inequality involving Co-Terminal/Co-Initial American vs Bermudan Swaptions

Let us consider a payment schedule $\mathcal{P}:=\{t_1,\dots,t_n\}$ which has a corresponding fixing schedule $\mathcal{F}:=\{t_0,\dots,t_{n-1}\}$. We have a series of co-terminal and co-initial swaps ...
2
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1answer
89 views

What is the industry standard model for pricing Swaptions during this time of negative interest rates, normal model or shifted log-normal model?

I have referred to the some of the well known papers but none of them has a clear answer for my question. I know that both of these models have some disadvantages but, what is the industry standard ...
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1answer
107 views

Swaptions vols,object using quantlib xl

How can I build a good vol surface using QuantlibXl? My goal is to price a swaption 5 year with option maturity 1Y1M. The data are:
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2answers
204 views

Normal vs. Lognormal Greeks for Negative Rates Options

My understanding is that for some of the G10 currencies with negative rates (CHF, EUR), Swaption and Cap / Floor prices are quoted in terms of BOTH, normal and log-normal Vols. That in itself is not ...
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1answer
896 views

How to compute forward swap rates?

I am trying to compute shocks on the forward swap rates based on shocks to the swap rate curve (aiming at repricing consistently a set of swaps and swaptions based on a shock to the swap curve): It ...
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1answer
56 views

Call Probability of European callable IRS

When pricing a callable IRS (say only one call date) with a diffusion model (e.g. HW 1F) with a Montecarlo resolution, one can get the call probability on the call date versus maturing the date (which ...
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0answers
117 views

How to use quantlib Excel for valuation of european swaption with vol surface to calibrate?

I would like to replicate the following Bloomberg pricer in quantlib using Quantlib xl. Is it possible? Thanks
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1answer
544 views

Swaption Vol surface

¿How can I get the implied vol from a swaption when I have a vol surface with the maturity of the option and the tenor of the swap? For example I want to know what is the volatility for a swaption ...
3
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1answer
168 views

Implied/Realised Vol ratio for negative rates?

I'm trying to calculate the implied vs realised vol ratio for different swaptions across major currencies. This works fine for the likes of USD and GBP as rates are positive. However I'm struggling ...
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1answer
153 views

Why does changing the evaluationDate multiple times lead to a performance lag?

I am simulating an swaption strategy through time. Following the examples in the Python Quantlib cookbook, as I progress through time I am updating the internal evaluation date ...
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1answer
1k views

European Swaption Pricing Using Normal volatilities

On page 6 of this paper a forumla is given for payer swaptions, I am just wondering what is the formula for receiver? My implementation of the formula for payer and receiver is here, but I am not ...
3
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1answer
519 views

QuantLib: Which CalibrationHelper to use for Normal Volatilities

I am using the SwaptionHelper class to create the swaptions. Reading the documentation: https://www.quantlib.org/reference/class_quant_lib_1_1_swaption_helper.html I realize that one of the ...
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1answer
226 views

Constructing Daily Term Structure

I am very new to QuantLib and am trying to do Swaption Model calibration following the example here:http://gouthamanbalaraman.com/blog/short-interest-rate-model-calibration-quantlib.html Appreciate ...
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717 views

Swaptions on SONIA/SOFR/ESTR

Given that LIBOR is being decommissioned and we must start building liquidity in swaptions on the OIS swaps, how do we price them? i.e. If I have a swaption on SONIA/SOFR/ESTR etc how does the pricing ...
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1answer
282 views

What happens to both sides of an inflation swap agreement if there is deflation?

If there is deflation does the Inflation receiver not only pay the fixed leg but also receives a reduced CPI? I.e. does he lose twice?
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98 views

PV01 of physically-settled swaption

Can we say that the PV01 of the physically-settled swaption is equal to the annuity / discount factor?
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0answers
58 views

PV01 of Physically settled Swaptions contrat

Can you please help me figure out how to find PV01 Physically settled Swaptions contract 20Y30Y with fwd rate 0.01974 with fixed freq=2, using ACT/360 with 02/08/2019 -> 02/08/2039 and 02/08/2069 ...
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1answer
161 views

Hedging convexity for long-dated fixed cashflows

I'm wondering what are the different ways of hedging the convexity in fixed long-dated cashflows (maturity > last liquid point). Also, if you'd say receiver swaptions would be the way to go, could you ...
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0answers
80 views

Swaption pricing and strategies

I am looking for resources (books, papers, websites, etc.) that deal with Vanilla and Exotic swaptions from a more advanced and quantitative perspective. I am interested in both the pricing side (e.g. ...