<t>Good day ladies and gents,I need to implement a reverse stress testing model (definition here)I have searched around and cannot find anything substantial on the topic. Does anyone know of any good papers/references regarding actual implementation? Please PLEASE dont post links to Basel docs. Than...

bwarren's idea is probably best but you can also simulate the short rate. So if, for example you wanted a 3M rate at each point, you could fit a model to do this. Let me know if you would like matlab code for parameter estimation.

<t>bara19, you can estimate the BK params with historical data via OLS. Just discretize your differential equation and set it up as in linear regression. After obtaining the intercept and slope of the regression you can solve for alpha and mu. SIgma is estimated from the variance of the regression's...

Your last question is the answer. The delta of a swaption is just the delta of an option on the forward swap rate adjusted by the annuity factor and notional.

<t>Indeed, risk managers will value both sides using the Euribor curve adjusted by the EUR XCCY basis (on the EUR side of each trade). Typically there is a control group checking to make sure the trader's curves have the xccy spread implicitly included in their rates. Discrepancies should be small. ...

EUR$ futures are quoted such that Price = 100 - 100*futures rate. Hence this rate would befutures rate = (100 - Price)/100When valuing options on IR futures you have to make such transformations before applying to your pricing model.

<t>Hi All,Im writing a quick routine to calculate implied vols for options on EUR$ futures with Bloomberg data. My question concerns the part where I have all my inputs and am ready to pass them to my implied vol function. Assume we have the following market quotes (example ticker: EDK1C 98.750 Comd...