Questions tagged [swaption]
The swaption tag has no usage guidance.
98
questions
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1answer
33 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 ...
0
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0answers
16 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:
0
votes
1answer
48 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
votes
1answer
97 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
21 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 ...
1
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0answers
44 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
0
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2answers
89 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
0answers
68 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
46 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
340 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 ...
0
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0answers
24 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
votes
1answer
166 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
129 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 ...
0
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0answers
76 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 ...
5
votes
0answers
342 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
votes
1answer
161 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?
1
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0answers
71 views
PV01 of physically-settled swaption
Can we say that the PV01 of the physically-settled swaption is equal to the annuity / discount factor?
1
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0answers
48 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 ...
1
vote
1answer
90 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 ...
0
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0answers
13 views
Procedure to estimate time dependent volatility of forward exchange rates using correlation matrix of the same
I am trying to compute the Black Volatility of a currency swaption and I am required to draw up a correlation matrix for the forward exchange rates. Could someone guide me as to how I can either get ...
1
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0answers
61 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. ...
0
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0answers
138 views
Vega for Constant Maturity Swaps
Why does a Constant Maturity Swap have a positive vega? Is it because of the convexity? How does one hedge it?
3
votes
1answer
343 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 ...
1
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2answers
1k 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 ...
1
vote
1answer
565 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 ...
0
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0answers
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 ...
1
vote
1answer
372 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 ...
1
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0answers
128 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 ...
1
vote
1answer
763 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 ...
0
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0answers
139 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 ...
1
vote
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 ...
1
vote
1answer
222 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 ...
7
votes
1answer
924 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 ...
1
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1answer
761 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 ...
2
votes
1answer
1k 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\,\...
4
votes
1answer
795 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
747 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. ...
0
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1answer
153 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
votes
1answer
281 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
votes
1answer
758 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 ...
0
votes
1answer
522 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 ...
7
votes
3answers
4k views
Forward implied volatility
Can one price accurately by only using vanilla options a derivative that is exposed/sensitive mainly to the forward volatility ?
If it is impossible, why do we hear sometimes "being long a long ...
1
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2answers
3k views
Mid-curve swaption
I would like to know how the mid-curve swaption could inform us about forward volatility.
In my understanding it is a swaption on a forward starting swap.
Let us say the midcurve swaption expires ...
2
votes
1answer
918 views
1y10y vs. 10y1y Swaption
Say you have two identical payer swaptions, exception for their terms and tenors. In other words, suppose you have two payer swaptions: $1y10y$ and $10y1y$.
All other things being equal, according ...
0
votes
1answer
308 views
Question on volatility equation for CMS pricing
In "Full implications of CMS convexity (Cedervall and Piterbarg, 2012)", a.k.a. "CMS: covering all bases (idem)", the authors develop a CMS model equipped with an annuity mapping function which ...
2
votes
2answers
176 views
Turning an amortising swaption into a normal swaption
Is there a way to enter a trading strategy in which the notional of the cashflows of an amortising swaption become all the same?
For example, imagine the notional for the first four cashflows of an ...
7
votes
2answers
2k views
Put-call parity for cash settled swaptions
The Euro swaption market is changing from cash to physical settlement quotation in July 2018 $-$ see e.g. "Euro swaptions market prepares for pricign revamp (Risk, 2018)". When describing the issues ...
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1answer
296 views
Bermudan Swaptions
Can someone explain, in layman's terms, the mechanics behind Bermudan Swapttions ( without having recourse to pricing models )?
Why are they popular? when are they used ?
How are they hedged i.e ...
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0answers
325 views
The “I want to price swaptions” request
In a small buy-side structure I recently had the following request : "I want to trade swaptions, I need to price them".
After a quick discussion the need is to price vanilla options on fix vs float ...
3
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0answers
2k views
Black-76 Model for Swaption Price and Greeks
I'm in the early stages of developing a swaption pricing model.
Suppose $t_1$ is the tenor of the swap rate in years, $F$ is the forward rate of the underlying swap, $X$ is the strke rate of the ...
