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G2++ calibration
Can anybody please help me how to get EUR ATM cap volatilities in bloomberg to calibrate G2++ model.
G2++ calibration
I want to confirm that i am using VCUB command in bloomberg to get EUR ATM cap volatilities to calibrate gaussian one factor.is it right?.My goal is to calibrate EUR 3m , 5y, 10y and do Monte carlo simulationbut i am getting wired values for EUR 3m after monte carlo.where as if do the same excercise for USD , 3m is fine. The only reason is see EUR cap vol is more volatile than US cap curve. Any inputs are appreciated?.
G2++ calibration
well, i'm not overly surprised if the one factor model doesn't give a good fit at both long terms and the short end...
G2++ calibration
only EUR 3m is giving me spikes after Monte carlo.is this because of Too high Cap volatilities ?.because if i compare EUR ATM cap vol for last 10 year , cap vol have increased drastically after 2008.
G2++ calibration
It has increased, because the rates decreased. If normal vol can be approximated by \sigma * F then in order to have a normal vol at 0.8%-1%, when rates are at 1% you need to have lognormal vol at 100%. That is as simple as that. There must be something wrong either with your calibration or simulation scheme.
Last edited by pimpel on February 24th, 2014, 11:00 pm, edited 1 time in total.
G2++ calibration
Can anybody , please help me how to calculate Market forward rate i.e. f^M(0,T) in G2++ interest rate model Thanks in advance