Questions tagged [swaption]
The swaption tag has no usage guidance.
129
questions
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35 views
Calculating DV01 of a swaption
Given a certain option price (premium) and implied volatility, how does one calculate the DV01 of a swaption? Is there any way to compute it analytically with Python?
2
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0answers
58 views
Bermudan Swaption Pricing via Least-Square Monte Carlo
I have some confusion regarding pricing a Bermudan Swaption using LSMC.
Let's say the underlying swap has payment dates $T_0 < T_1 < \ldots < T_n$ and for simplicity, assuming the exercise ...
0
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2answers
168 views
Swaption ATM Vol Quotes and Interpretation: Normal Vol to Black
How do you interpret the time-series of 1m10y black vol vs normal vol? Normal vol would have you believe, that rate vol has since 2000 been low whereas black vol would show you a different picture.
...
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35 views
Potential risks Trade Idea
I came up with a trade idea that wins when Interest rates increase.
I am playing that by buying a Payer Swap and selling a deep ITM Receiver swaption at ATM+60 (same notional). I chose that strategy ...
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1answer
55 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)?
...
2
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0answers
99 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 ...
0
votes
1answer
107 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
65 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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39 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.
1
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1answer
103 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 ...
1
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1answer
212 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 ...
7
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1answer
279 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
202 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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122 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
74 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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vote
0answers
80 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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35 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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44 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 ...
6
votes
3answers
527 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 &...
0
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1answer
221 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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96 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
116 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 ...
8
votes
1answer
969 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
775 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
166 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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30 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:...
0
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1answer
88 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
603 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 ...
2
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1answer
339 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
455 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
votes
3answers
471 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
votes
2answers
366 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
310 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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42 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
140 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
99 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
112 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
237 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 ...
2
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1answer
1k 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
61 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
126 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
660 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
votes
1answer
189 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 ...
0
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1answer
174 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
...
0
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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
votes
1answer
572 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 ...
0
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1answer
234 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 ...
6
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0answers
780 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 ...
0
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1answer
290 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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104 views
PV01 of physically-settled swaption
Can we say that the PV01 of the physically-settled swaption is equal to the annuity / discount factor?
