# Questions tagged [swaption]

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### 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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### 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 ...
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### 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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### 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 ...
1 vote
322 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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### 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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### 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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### 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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### QuantLib Swaption Vol Cube

I am currently trying to price swaptions under QuantLib/Python using a volatility cube using ql.SwaptoinVolCube2. From the documentation: ...
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### 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 ...
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### 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 ...
860 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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### 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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### 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 ...
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### 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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### 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:
1 vote
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### 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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### 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 ...
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### Call Probability of European callable IRS [closed]

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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### 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
1 vote
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### 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 ...
356 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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### 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 ...
2k 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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### 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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### 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 ...
• 175
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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 ...
352 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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### 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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### 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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### 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 ...
1 vote
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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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### 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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### 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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### 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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### 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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### 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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### 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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### 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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### 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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### 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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### 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 ...
2k 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 vote
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### 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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### 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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### 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, ...
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### 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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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 ? ...
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### 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, ...
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