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Calibration of BGM to Caps
Hi all,I have got the black volatilities for 1y, 2y, 3y, 5y, 7y and 10y caps and would like to use them to calibrate the LIBOR market model. Yet, how should I extract the caplet volatilities from the caps as they are semi-annually reset? Is interpolation a must? Which interpolation method is the best?Many thanks!