Questions tagged [swaption]
The swaption tag has no usage guidance.
39
questions with no upvoted or accepted answers
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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,...
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981
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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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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 ...
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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 ...
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Why are LMM+ parameters becoming more unstable when using an inverted volatility term structure
I have an implementation of an LMM+ model (a shifted Libor Market Model with rebonato volatility function) and am seeing recently that the calibrated parameters are becoming more unstable over time; I ...
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2
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208
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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 ...
2
votes
1
answer
1k
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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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2
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0
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303
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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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2
votes
0
answers
3k
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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 ...
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2
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523
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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 ...
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2
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0
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425
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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 ...
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1
vote
0
answers
176
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SabrSwaptionVolCube Class in Quantilib Python
Just noticed after upgrading to the most recent version of Quantlib Python that the class ql.SabrSwaptionVolCube is now available. This is a very useful class in that it behaves in very much the same ...
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1
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0
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185
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Call probability of a callable swap
For one call date,
The call probability is just the probability that the swap rate for the remaining life of the swap is below the strike rate. This is easily obtainable in a normal vol model, it is :
...
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1
vote
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108
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Calibrating HW 1f model params to a term structure market data
I am using Quantlib to calibrate the HW model params to the market swaption price. The attached chart shows the performance of the calibration.
Am I correct in saying, this is expected for the 1f HW ...
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1
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0
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379
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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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1
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0
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328
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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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293
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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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194
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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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0
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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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156
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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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6k
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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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1
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543
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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 ...
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0
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303
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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 ...
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207
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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 ...
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1
vote
0
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653
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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: ...
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1
vote
0
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119
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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
...
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0
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0
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105
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Backtesting One-Factor HJM model with selling European Receiver Swaption
I am attempting back test the performance of a model - namely the Musiela equation used to model instantaneous forward rates with constant time to maturity:
$$r(t,x)=r(0,x)+\int_0^t\left(\frac{\...
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130
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A rates model for EUR and USD pricing in different underlyings (EURIBOR (yes) or ESTR, and SOFR)
Being a house mainly focused on almost everything else that rates products we never had a "rates pricer", no surprise. The best connected to rates thing we have is an equity/fx/what have you ...
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Is it possible to estimate 'future zero curves' using Hull-White 1 factor model?
With regards to the following:
https://www.mathworks.com/help/fininst/price-bermudan-swaptions-with-different-interest-rate-models.html
It seems to me that the HW1 model is used to generate the ...
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0
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96
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Pricing the embedded option in a callable floating rate note
From my understanding, I know that we can decompose a long callable bond into a long vanilla bond and short receiver swaption. However, I do not understand, how could I separate or calculate the ...
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97
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Validity of Bermudan Swaption's Price/Greeks
I'm implementing a lot of stochastic models on my own for fun and I'm quite puzzled about the usual procedure concerning the correctnes of Bermudan swaptions prices and greeks ? How can you tell that ...
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0
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191
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Swaption risk bucketing
In the IR swaption market, we have 24Expire10Tenor instruments(like a 2410 Matrix).
Now I have the Vega number for each instrument, and I want to reduce the matrix size with the same total vega risk.
...
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0
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Unable to link volatility structure to swaption pricing engine
Good morning,
I am trying to link the volatility surface to my swaption pricing engine.
...
0
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0
answers
97
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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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230
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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,...
0
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0
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82
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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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0
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273
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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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948
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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
...
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-1
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1
answer
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Swaption Corridor Payoff Diagram
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 ...
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