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JohnLeM
Posts: 515
Joined: September 16th, 2008, 7:15 pm

Re: Martingale Correction

March 3rd, 2021, 8:43 pm

solved it...

I work on both the curves for model calibration:

part1: squared error in swaption prices.   

part2: matching P(t, t+1) from the analytical and the model formula

Of course, I lose some information on the swaption vol part, but this seems to be a reasonable approach to deal with the two curves. 
I thought about your problem this morning. I think your approach is reasonable, although I am not an expert with rate models.
I think that your approach hypothesizes that the EIOPA process is perfectly correlated to the underlying rate of your provider data. Having a look to how are built this two curves might help you validating this hypothesis, and ease communication toward your client / boss / advisor.