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# Questions tagged [swaption]

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### American Swaption Heding with Malliavin Calculus

Hedging American Swaption Hello, I priced an American swaption using Black model with swap rates diffusion to find the european (call) price at t.  C_t = (\delta \sum_{j=n+1}^{M+1} Z_t^{T_j})[R(t,...
116 views

### Volatility Parametrization Libor Market Model - Underspecified Model?

Does the volatility parametrization that I have chosen give an underspecified model? Which volatility parametrization in the Libor Market Model would suit the best for the particular case described ...
1k views

### market value of a forward premium swaption

For a cash-settled vanilla interest rate swaption traded with forward premium paid in full at expiry of the option, what should the "mark-to-market" be during the life of the option? Should it be ...
433 views

### American Swaption Pricing with PDE discretization

So I am still trying to price an american swaption. (MC approach here: American Swaption Pricing with Monte-Carlo method) I've found in Paul Wilmott, The mathematics of financial derivatives, a PDE ...
306 views

### Weighted average implied optionlet/swaptions volatility

Let an implied volatility curve/surface is made up by optionlets or swaptions Black's implied volatility. If you wanted to price, say, a FRN with cap and/or floor, a CMS et cetera you would input the ...
51 views

### PV01 of physically-settled swaption

Can we say that the PV01 of the physically-settled swaption is equal to the annuity / discount factor?
44 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 ...
39 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. ...
95 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 ...
266 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 ...
1k 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 ...
263 views

### Interest rates - Swaptions implied volatility - Volatility anchoring with Black and with normal volatilities

In a LMM+ with displacement factor a volatility anchoring technique is used, i.e. a long term volatility assumptions is applied, derived from historic time series. Should I adjust this historic ...
157 views

### Estimate the risk of swaptions

I would like to model OTM Swaptions. I can use some implementation of the Bachelier model (not B76 due to negative rates) and implied volatilities from Bloomberg. For 10Y X 10Y (10 years option ...
421 views

### Pricing back swaptions corresponding to underlying swaps of Bermudan Swaption in calibrated LMM

I do not know to which swaption volatility matrix I have to calibrate the LMM in order to price back correctly the swaptions corresponding to the underlying swaps of a Bermudan Swaption. My problem: ...
102 views

### Price 3m libor autocap with LMM calibrated on 1y swaption data

I need to calculate a price of an autocap contract which is An autocap is similar to a cap, but at most γ ≤ β caplets can be exercised, and they have to be automatically exercised when in the ...
89 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?
12 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 ...
83 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?
429 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 ...
96 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 ...
671 views

### Calibration Problem in the LMM-Skew (Shifted Diffusion) Model

I have implemented the LIBOR market model (LMM) and I am quite satisfied with the results. I have now added a skew to the model as described in 10.1 of Brigo/Mercurio. That is, I have replaced the SDE ...
What does the payoff diagram look like for a long payer swaption corridor? For example, suppose that I am looking at a long-payer $1 \times 10$-year swaption with 10Y swaps as the underlying. If I ...