I’m curious to hear your view on what is the most common way a trader nowadays defines the Cap and Swaption Surfaces when pricing a Vanilla Cap or Vanilla European Swaption to a client. The assumption is that the Premium is paid by the client ‘today’ (spot=2d) – and the trade is cleared and based o...

<t>Hi,How about from a general point of view for NDS - not just TWD.As I understand it:All cash flows (Fixed and Float) are paid in USD and converted from the local currency (for example TWD) to USD using the FX rate each time when rolling. But the float leg used in fixing - is that always the local...

<t>Hi, I?m looking at a TWD NDS and wonder how the two Legs are defined?Is it:Leg1: Receive Fixed TWD QuarterlyLeg2: Pay Float TWD TDSF90D Quarterly? and all net Payments are converted to USDOR:Leg1: Receive Fixed TWD QuarterlyLeg2: Pay Float USD LIBOR 3M Quarterly? and all net Payments are converte...

<t>Thanks for answer - and I realize I wrote wrong... of course I mean the underlying swap itself and thanks for pointing out.SO:If the Swaption trade will be agreed with the counterparty to be exercised into::1. ? a physical swap which will BE cleared, then I should value it with an underlying swap...

<t>Thanks for the answers,So when I theoretical price the swaptions before the trade and If I compare the broker prices published in Reuters and Bloomberg:1. If the Swaption trade will be cleared ? then I should value it with an underlying swap with OIS discounting2. If the Swaption trade is agreed ...

Hi,When buying an OIS Discounted 3m10Y Payer Swaption with physical delivery ? and the swaptions is in the money at expiry ? will the counterparty and me enter into a 5Y swap valued with an OIS Discount Curve ? or is it still an underlying IBOR swap?Thanks,Scalper

<t>Hi, Sorry for jumping into this Topic instead of a related one (Fwd premium quoted for vanilla option - good/bad?)But this is (instead) very much spot on my questions. Thanks to Martinghoul ! I now understands this a little bit better ? but still need your brain (or someone else) to fully get to ...

<t>How to price the swaptions and how do you trade it?Very interestingIf you trade an ?old? quoted swaptions you calculate the option premium ?today? (and pay it maybe 2 days later) using for example Black. You use the same Swap for forward estimation and discounting ? and the theoretical price is e...

<t>OK, Thanks for the answer. Question: Anyone aware of ANY kind of OAS approach (Not necessary LOAS) as a tool to measure any potential arbitrage between the current CTD bond and the likelihood that the CTD will change? OR: Is this just a completely different thing?Related:I’m aware of the delivera...

<t>Hi,Anyone heard about Libor Option Adjusted Spreads (LOAS) for Bond Futures?I’m familiar with the fact that one can measure which bond is CTD either by comparing the highest Implied Repo or Lowes Net basis. BUT: Is it possible to use some kind of OAS approach as well?If so - how is it calculated?...

Hi, What valuation model is used in Bloomberg behind the Principal Valuation in the SYNTHETIC CDO TRANCHE PRICER window?Thanks,Scalper

<t>Hi,Follow up question regarding my question No3 below:If I for example trade 500M in a EUR 6m10Y ATMF Swaption Straddle based on the following market data as of today:Forward Rate 6M10Y Swap = 4.415 = Strike => TheoPrice of 1.513 for both the Payer and Receiver using a Vol of 15.50 percentDV01 fo...

Thanks fro the answer, Regarding the probability distribution of the Forward Rates: Would you say that the same problem is for Caps/Floors as well?/Scalper

<t>When trading vanilla European Swaption straddles: - The theoretical price for the Payer and Receiver are identical when both strikes equals the Forward started swap Par rate.- The Vega(1%) and the Market Value is identical for both the two trades.BUT: I have problems with the Delta: (I refer to t...

<t>Hi,I have traded swaptions a lot and the best way is to sell ATMF straddles and try to delta hedge with the underlying swap. But, be careful, you have to choose gamma instead of scalp gamma, but that's a part of the game...Another way is to sell Swaption volatility and buy Cap/Floor vol. I would ...