### Illiquid swaption implied vol calculation

Posted:

**December 27th, 2016, 10:54 pm**Hey friends,

In Turkish Lira, TRY swaps are traded every once in a while but you rarely see some go ahead and pay fixed 2Y TRY vs receive float 3M TRLIBOR ( or vice versa) hence, TRY swaptions aren't liquid.

Most of the activity is done via XCCY swaps, which in turn results in the derivatives to be on XCCY swaption as these are more liquid.

I wonder if there is any way to back out illiquid swaption implied vol level ( TRY swaption in this case) through XCCY TRY-USD and USD swaptions like we can do in FX space with triangulation rule ?

Assuming I can also apply the triangulation, to be in ball park for TRY swaption, what would you suggest to use as my correlation ? Even in FX, implied correlation isnt easily found- I dont think it would be any easier for swaptions. I am thinking about creating a time series of USD 2Y IRS swap and TRY-USD 2Y XCCY swap wit 5 years of history and calculate correlation between those 2 arrays.

Appreciate any input here. Thank you.

In Turkish Lira, TRY swaps are traded every once in a while but you rarely see some go ahead and pay fixed 2Y TRY vs receive float 3M TRLIBOR ( or vice versa) hence, TRY swaptions aren't liquid.

Most of the activity is done via XCCY swaps, which in turn results in the derivatives to be on XCCY swaption as these are more liquid.

I wonder if there is any way to back out illiquid swaption implied vol level ( TRY swaption in this case) through XCCY TRY-USD and USD swaptions like we can do in FX space with triangulation rule ?

Assuming I can also apply the triangulation, to be in ball park for TRY swaption, what would you suggest to use as my correlation ? Even in FX, implied correlation isnt easily found- I dont think it would be any easier for swaptions. I am thinking about creating a time series of USD 2Y IRS swap and TRY-USD 2Y XCCY swap wit 5 years of history and calculate correlation between those 2 arrays.

Appreciate any input here. Thank you.