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Dear Wilmotters,Just talked to a friend which told me that ICAP will start prividing Cap/Floor IVs backed out from a DD Black Model. I did some research on the internet but I couldn't find any news about this...I was expecting ICAP to release some press communications (at least on their web site) if this was the case... have you guys heard anything about this? Cheers,jp

there are already quotes for EUR with displacement 1%, at the moment in parallel to the old ones without displacement. VCAP3 and VCAP3A (think that were the reuters pages)

Super! Thank you for the reference.

I saw ICAP as a provider of cap/floor quotes on Thompson Reuters (Eikon).

i am not into fixed income atm. But i wonder if this changes valuations of exotics? Given the use of a short rate model for lets say a bermudan swaption what difference does it make to have vols quoted by DD volatility? You would just need the premium of the vanilla swaptions. Then do the calibration. And continue as before?!Also i wonder why sabr isnt used. As SABR is often used for CMS products why not use sabr to quote vanillas. I mean sabr does also allow for negative forwards (if beta <1). So it does solve this issue. So why not use a "popular" model. Also i wonder if there isnt any trend to quote premiums rather then vols? This would also leave the model choice to the "user" of the premiums....

the matrix _points_ on VCAP3 (ln vol), VCAP3A (shifted ln vol) and VCAP4 / VCAP5 (Cap / Floor Premia) are very consistent from what I calculate, i.e. you can reproduce the quoted premia from both ln and shifted ln vol. Inter- / Extrapolated prices are of course model dependent and in particular different when interpolating on VCAP3 or 3A.the problem might more be of an infrastructure nature, as clients might directly use the quoted vols for their valuation systems. Every change as to shifted ln or premium inputs would then cause major work to adapt the systems.

We certainly use a displaced sabr model for some CCYs for vanillas and exotics. It can be non trivial recalibrating the displaced Sabr parameters (from a standard calibration) as you have complete freedom over which products and strikes/deltas should be used.