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james88
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Joined: September 24th, 2007, 7:02 am

swaption vol

February 19th, 2008, 5:00 am

i need to price 2yr CMS swaps, market quotes of swaption vol are givenwhen extracting the swap vol, is it the same method as that for market cap vol quotes?(stripping the cap into caplets)and i only need to look at the column for 2 yr swaption vol, right?the table is given belowUSD Swaption Vol Surface Expiry/Tenor 1Y 2Y 3Y 4Y 5Y27/08/2007 8.80 12.20 12.10 12.00 11.9029/10/2007 10.50 13.10 13.10 12.90 12.7028/01/2008 12.60 14.10 14.10 13.90 13.6028/07/2008 15.70 15.60 15.50 15.00 14.6027/07/2009 16.40 16.00 15.70 15.40 15.2027/07/2010 16.30 16.00 15.70 15.40 15.2027/07/2011 16.10 15.80 15.50 15.30 15.0027/07/2012 15.80 15.50 15.20 15.00 14.8028/07/2014 14.90 14.60 14.40 14.20 14.1027/07/2017 13.70 13.50 13.30 13.20 13.10
 
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manolom
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Joined: March 14th, 2006, 2:52 pm

swaption vol

February 19th, 2008, 8:04 am

A cap is a portfolio of options (namely caplets), that's why you need to bootstrap in order to obtain the vol of each option. A swaption is only one option; therefore no bootstrapping is required. You're right, you only need the column related to 2Y-tenor swaptions.