Questions tagged [swaption]
The swaption tag has no usage guidance.
107
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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:...
0
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1answer
40 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
109 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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0answers
35 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 ...
2
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1answer
223 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
129 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:
...
3
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3answers
366 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 ...
2
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2answers
116 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 ...
0
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1answer
79 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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33 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
69 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
65 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
59 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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1answer
88 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
207 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 ...
0
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1answer
32 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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70 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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2answers
143 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
110 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
70 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
586 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 ...
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32 views
Quantlib gives error message when Valution date is backdate
Valuation Date As Backdate(12 November 2019)
On calcuating Vanilla Swap, Quantlib gives error message as below
...
3
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1answer
267 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
165 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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117 views
Swap rate in the annuity measure and Martingale Representation Theorem
As we know, swap rate evolves as a martingale in the appropriate annuity measure. Martingale representation theorem says if I can find a Brownian motion in the annuity measure and the swap rate is ...
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0answers
448 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
220 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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79 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
53 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
102 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
66 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. ...
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1answer
451 views
What is upper left vol?
First time question, so please let me know if you have feedback for how I am asking.
I am reading a market research piece and it makes reference to the performance of "vol, particularly the upper ...
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2answers
2k views
Forward swap rate calculation from the market
Following my question
Swaption valuation across time using vcub
where I wanted to know how to value a swaption across time using bloomberg's vcub, I remark that I have to calculate myself the ...
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1answer
772 views
Swaption valuation across time using vcub
On Bloomberg one has access to the rates vol cube with the VCUB function. For a given currency, today, one sees Black implied volatilities for swaptions of various expiries and strikes, for forward ...
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2k views
Swaption : Bloomberg Black implied volatility quotes and pricing in the Black model
I used a lot Bloomberg's VCUB for data, but never used its integrated swaption pricer "Quick Pricer for Swaptions", nor Bloomberg's "full" swaption pricer from "SWPM -OV".
I am retrospectively quite ...
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1answer
487 views
Bermudan Swaption
Is there an equation of the kind of call-put parity for Bermudean swaptions ? (maybe an inequality )
Is there an intuitive description of what would be an optimal exercise moment ? Intuitively I ...
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0answers
141 views
SABR for swaptions
We calibrate SABR on each expiry and tenor combination using market data. (e.g. 1mx10y, 3mx10y etc.) Then how about the non-standard expiry like 2.5mx10y? Do I linear interpolate the alpha, beta, rou ...
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1answer
885 views
Volatility surface for Swaptions
I understand the volatility surface for swaption is built using implied vols of ATM swaptions. I had a question on the instruments that are used.
Should the instruments used change depending on the ...
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155 views
Moneyness for Cancellable Swaps
Hi I wanted to know we can assess the moneyness of Cancellable swaps?
For example, I have a swap where I am paying the fixed rate and also have an option to cancel this option. How do I assess the ...
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1answer
56 views
Port a model dependent swaption sensitivity to a new model
I have a short rate model in which I have (among others) the following metric (for leverages) for a swaption : $$L = \frac{\frac{\partial}{\partial r}V_0^{\textrm{Swaption}}}{\frac{\partial}{\partial ...
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1answer
288 views
Can the value of a swaption at any time become more negative than the swaption premium?
I am interpolating swaption values as a function of parallel shifts in interest rate and have come across some peculiar shaped options among the data I have at hand.
Here is an example of a simple ...
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1answer
1k views
CMS Pricing - Convexity Adjustment by Replication [closed]
I'm trying to learn CMS pricing, but didn't get the logic of this method. Previously cited articles about this method is pretty complex.
I'd be glad if you can provide me with simpler articles or ...
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1answer
906 views
Positive convexity swaptions
Can I please understand why payer swaptions have positive convexity and receiver swaptions have negative convexity? I understand payer swaptions are akin to put options on bonds and put options have ...
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1answer
2k views
Swaption annuity factor
In H. Corb's book about interest rate swaps and oder derivatives, the present value of an T into n payer swaption is given via
$A\sigma\sqrt{T}\left[\frac{1}{\sqrt{2\pi}}e^{-\frac{d^2}{2}}+d\,\...
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1answer
937 views
Modern market conventions for interpreting interest rate swaptions quotations in a negative interest rate environment
I have broker data and I see three sets of swaption vol data:
Lognormal (Black)
Shifted Lognormal (Black with displaced diffusion)
Normal (Bachelier)
The quotes are given by the following key (Date, ...
8
votes
1answer
889 views
Swaptions Gamma Interview Questions
A while ago, I interviewed for a trader role and was given the below assignment (I didn't get the job). I wanted to revisit the questions to learn from my mistakes and be better prepared next time. ...
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1answer
182 views
Spreadlock derivatives
I would like to price a spreadlock forward swap and a spreadlock swaption but I don't find in the web any research article. Would you please provide me with some freely accessible papers on the web ? ...
2
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1answer
307 views
HJM or Short rates model?
When market practitioners do prefer HJM models to short rates models when it comes to pricing derivatives (other than swaptions and caps, let say light exotics to exotics) ?
To be more specific, ...
2
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1answer
870 views
Interest rates forward implied volatility models
I'm trying to find out which model to use to price a pur forward volatility product named VolBond marketed by structuring desks currently.
Let me introduce the products first:
Example 1: You pay 100 ...
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1answer
614 views
Bucketed gamma for swaptions
For a long 7Y1Y payer swaption, I understand that the overall gamma will be positive.
I see gamma to be positive in 7Y tenor and negative in 8Y - why would that be the case?
Intuitively, how would ...
