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Swaption vol.
Why is the implied vol. curve for swaption with short maturity more like a smile, while the implied vol for longer maturity looks more like a skew?
Swaption vol.
Could it have something to do with the asymmetry of the interest rates? For shorter dates swaptions, the chance of relatively large changes in a short period (eg. 6 months) would most likely be symetrical unless interest rates were very low.However, for longer dated swaptions, the practical lower limit of about 0.75% for interest rates would lead to a lower bound for falls, but no upper bound for rises in interest rates. Hence their would be a skew to high end...Not sure, just my thoughts...