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Hymn
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Posts: 6
Joined: February 27th, 2012, 1:52 pm

Cap&Floor: benchmark pricing model

April 4th, 2016, 12:30 pm

Hi,in a context of negative interests what kind of pricing model are you using to price the cap&floor instruments? And about the market data, especially the volatitlity?Today, more instruments have embedded a floor instrument with strike 0, how to price the embedded derivative?Thanks
 
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Jhammer
Posts: 37
Joined: February 24th, 2014, 8:05 pm

Cap&Floor: benchmark pricing model

April 4th, 2016, 2:05 pm

How about Normal or shifted Lognormal? This could be useful for you: http://www.wilmott.com/messageview.cfm? ... adid=98307
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