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by japanstar
August 21st, 2017, 1:23 pm
Forum: General Forum
Topic: Is SABR used to price swaptions at all?
Replies: 2
Views: 1114

Re: Is SABR used to price swaptions at all?

Hi - SABR (forward interest rate) model, cannot model the joint evolution of forward rates, as it should take their correlation into account as well as evolving them under a single measure. To take those two requirements into account you need to resort to SABR-Libor Market Model. The industry uses S...
by japanstar
July 29th, 2015, 8:24 pm
Forum: Technical Forum
Topic: Stochast/Local Vol LMM
Replies: 61
Views: 54435

Stochast/Local Vol LMM

<t>The issue is in fact already present when working with only caplets. Especially in the SABR LMM, under particular assumptions, this parametrization doesn't work. An alternative method is described in this upcoming book (tests done in particular challenging market conditions are showed). The metho...
by japanstar
July 29th, 2015, 1:54 pm
Forum: Technical Forum
Topic: Stochast/Local Vol LMM
Replies: 61
Views: 54435

Stochast/Local Vol LMM

could you please clarify why a time homog. vol function generates a poor calibration? do you mean that you are not able to actually recover the market vols because the Rebonato function is not able to fit every possible shapes seen in the market? EDIT: rephrased question
by japanstar
May 29th, 2015, 1:20 am
Forum: Technical Forum
Topic: Measure Adjusted Hedging in LMM
Replies: 4
Views: 3326

Measure Adjusted Hedging in LMM

Thank you all! Your comments have been very helpful.
by japanstar
May 28th, 2015, 9:16 am
Forum: Technical Forum
Topic: Measure Adjusted Hedging in LMM
Replies: 4
Views: 3326

Measure Adjusted Hedging in LMM

<t>Hi All,Let's suppose I have a SV LMM, which I use to price the a product dependent on multiple forward rates. Let's also say that I am able to have an excellent calibration to the caplet vol surface. I can check this by running my MC in the appropriate measures - i.e. if I run my simulation in th...
by japanstar
February 24th, 2015, 5:46 pm
Forum: Technical Forum
Topic: Simulation of SABR/LMM a la Rebonato
Replies: 5
Views: 5245

Simulation of SABR/LMM a la Rebonato

As soon as I get the latest Palgrave catalog I'll tell you the exaxct title, authors and issue date.
by japanstar
February 24th, 2015, 1:42 pm
Forum: Technical Forum
Topic: Simulation of SABR/LMM a la Rebonato
Replies: 5
Views: 5245

Simulation of SABR/LMM a la Rebonato

<t>There is an upcoming book, published by Palgrave Macmillan, which contains a MC implementation code for SABR LMM (together with other code snippets to be used for calibration etc.). It does not address exactly your problem as a 0 fwd-vol correlation set up has been used throughout the book (for o...
by japanstar
October 18th, 2013, 9:16 am
Forum: General Forum
Topic: Zero coupon cross currency bermudan swaption
Replies: 2
Views: 6712

Zero coupon cross currency bermudan swaption

Sorry for asking, but If your underlying swap is fixed to fixed, what is the option random underlying asset?
by japanstar
December 24th, 2012, 2:59 pm
Forum: Technical Forum
Topic: cap volatility interpolation
Replies: 2
Views: 10221

cap volatility interpolation

I've not experience with BB interpolation but I was wondering if you've tried to use SABR to fit the whole surface.
by japanstar
December 19th, 2012, 2:02 pm
Forum: General Forum
Topic: ICAP, Vols Using Displaced Diffusion?
Replies: 6
Views: 11953

ICAP, Vols Using Displaced Diffusion?

Super! Thank you for the reference.
by japanstar
December 18th, 2012, 8:48 am
Forum: General Forum
Topic: ICAP, Vols Using Displaced Diffusion?
Replies: 6
Views: 11953

ICAP, Vols Using Displaced Diffusion?

<t>Dear Wilmotters,Just talked to a friend which told me that ICAP will start prividing Cap/Floor IVs backed out from a DD Black Model. I did some research on the internet but I couldn't find any news about this...I was expecting ICAP to release some press communications (at least on their web site)...
by japanstar
October 19th, 2012, 5:25 am
Forum: Student Forum
Topic: CCY Basis Adjustment - how CCS pricing is impacted
Replies: 4
Views: 10815

CCY Basis Adjustment - how CCS pricing is impacted

What's the problem with the 4 curves approach?
by japanstar
September 9th, 2012, 4:06 pm
Forum: General Forum
Topic: Bianchetti's Formulas - Are they actually used?
Replies: 17
Views: 14389

Bianchetti's Formulas - Are they actually used?

Thank you all for the detailed explanations and the references!
by japanstar
August 24th, 2012, 9:32 am
Forum: General Forum
Topic: Bianchetti's Formulas - Are they actually used?
Replies: 17
Views: 14389

Bianchetti's Formulas - Are they actually used?

<t>Dear Wilmotters, I've been reading Bianchetti's paper 'Two Curves, One Price' together with many posts related to this topic. It seems that many institution have actually started using two distinct curves (since few years already), one for discounting and several ones to compute their forwards (d...
by japanstar
August 15th, 2012, 4:04 am
Forum: Student Forum
Topic: Heston's option price >(=) BS-price
Replies: 17
Views: 12042

Heston's option price >(=) BS-price

<t>QuoteOriginally posted by: AlanQuoteOriginally posted by: japanstarHi Alan,Sorry for the probably banal question: would you mind showing how you arrived atC(sigma + d sigma) - 2 C(sigma) + C(sigma - d sigma) from d^2 C/ d sigma^2 ?Thank you very much!Ps: it is really great to have someone like yo...
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