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Swap Curve and Strike of a Swaption
Last edited by Raul85 on October 12th, 2009, 10:00 pm, edited 1 time in total.
Swap Curve and Strike of a Swaption
Do you mean the ATM strike of a swaption?P.
Swap Curve and Strike of a Swaption
For the ATMF (at the money forward) straddles you simply use the swap curve to imply the strike.E.g. for the 6m3y strads, the strike is the implied rate on the 3y swap starting in 6months time
Swap Curve and Strike of a Swaption
QuoteOriginally posted by: redhed99For the ATMF (at the money forward) straddles you simply use the swap curve to imply the strike.E.g. for the 6m3y strads, the strike is the implied rate on the 3y swap starting in 6months time... give or take a few days to get to spot...
Swap Curve and Strike of a Swaption
Last edited by Raul85 on October 12th, 2009, 10:00 pm, edited 1 time in total.
Swap Curve and Strike of a Swaption
You can imply the strike from the yield curvewhere P(0,*) is the price of a zero coupon bond with expiry *t_0 is the starting date of the underlying swapt_n is the maturity datet_i the payment dates for the fixed legtau_i is the day count convention for the ith coupon of the fixed legP.
Swap Curve and Strike of a Swaption
Last edited by Raul85 on November 22nd, 2008, 11:00 pm, edited 1 time in total.
Swap Curve and Strike of a Swaption
Paolos said to use the price of a zero coupon bond, not to use the average of a swap rate. You need a yield curve to get discount factors, once you have that you can move on to forward rates and the exotic world of swaptions
Swap Curve and Strike of a Swaption
Last edited by Raul85 on October 12th, 2009, 10:00 pm, edited 1 time in total.