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Cap&Floor: benchmark pricing model

Posted: April 4th, 2016, 12:30 pm
by Hymn
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

Cap&Floor: benchmark pricing model

Posted: April 4th, 2016, 2:05 pm
by Jhammer
How about Normal or shifted Lognormal? This could be useful for you: http://www.wilmott.com/messageview.cfm? ... adid=98307