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lePiddu
Topic Author
Posts: 20
Joined: March 17th, 2015, 2:15 pm

Historical Volatility for Black-76 Formula

December 11th, 2019, 8:56 am

Hi everyone!
I have a very "simple" question but I think the answer is not completely straightforward:

"What historical volatility would you compare to the implied volatility of a standard Swaption (priced with Black-76 formula)?"

That is, totally disregarding how to estimate the volatility (in the sense of GARCH, bayesian, time periods and so on ...) what data would you use, for example, for a 3m10y Swaption? would you use the historical series of the corresponding spot interest rate swap, the 10y swap rate? Or the historical volatility of the corresponding forward swap, the 10y swap 3m forward? Or something else?

The natural extension is (and the original question was) :

"What historical volatility would you use to price a Midcurve Swaption (that is an option to enter into a forward starting swap)?"

Same as before, what data series would you use (or construct) to estimate this volatility?

Thanks in advance =)
 
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mtsm
Posts: 352
Joined: July 28th, 2010, 1:40 pm

Re: Historical Volatility for Black-76 Formula

December 11th, 2019, 7:56 pm

Pick up the old ML paper. I can send, ping me.
 
User avatar
lePiddu
Topic Author
Posts: 20
Joined: March 17th, 2015, 2:15 pm

Re: Historical Volatility for Black-76 Formula

December 19th, 2019, 8:12 am

Pick up the old ML paper. I can send, ping me.
hi mtsm! I pm'd you but I couldn't receive an answer. Anyway I don't know what paper are you referring to, can you provide a reference? 

Thank you very much in advance!
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