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Swaption Analysis
H, I posted this on the technical page but it seems to have got lost in the deluge of other posts. I was wondering why it is the convention to quote basis point vols for swaptions as bp/day and how this quote is calculated. I have seen this on several papers analysing swaptions and as yet I dont see the relevance. Thanks in advance for anyone who can help on this.
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- FDAXHunter
- Posts: 14
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Swaption Analysis
It shows, how, on average the size of the move you have to capture in the swap (when rebalancing your deltas), in order to break even.Hope this helps.
Swaption Analysis
Actually FDAX, it does help quite a lot. Now the question is, how would I calculate it?
Swaption Analysis
Forward yield * yield vol / sqrt (250).Practitioners focus on this measure, as Fdax says, cos it indicates your daily breakevens for gamma trading, and allows easy comparisons across markets.
Swaption Analysis
Thank you both very much. Your responses were very useful indeed.