7 votes

Calibrate a SABR model?

1) The paper Explicit SABR Calibration Through Simple Expansions explains how to calibrate the SABR model in practice. 2) The role of alpha, beta and rho is well explained in the original SABR paper ...
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  • 1,163
5 votes

Black and Normal Model for Caplet using Python

are you using the same volatility 20% for both black76 and Bachelier? The black76 is a lognormal model, where volatilities are quoted as relative price changes. The bachelier/normal model quotes ...
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  • 607
3 votes
Accepted

Is there a ZABR model on Quantlib XL

ZABR classes are currently only in C++ and Python via SWIG, at least to my knowledge. QuantlibXL is generally not as quick to receive updates to developments in the C++ library because a substantial ...
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  • 481
2 votes
Accepted

How to build a volatility surface for caps from the SABR model?

The procedure you have specified in your last paragraph is the only reasonable way to do it. Clearly the cap volatility is some sort of weighted average of the constituent caplet volatilities, but ...
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  • 13.7k
2 votes

python scipy optimize minimize arguments for Implied Volatility

Error was in the diff line, where it should be the modulus of the difference. We want the difference to be zero, instead of minimum (which is -infinity). Thanks to 'LocalVolatility'. ...
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  • 607

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