I am also interested in pricing mid curve swaptions. Here a market model such as BGM(LMM) seems to be the way to go since we want to back out a volatility term structure. However, mid curve swaptions also exhibit a skew. So again we end up needing to do a LMM + skew model. Is there a nice unified model, that is also parsimonious ? Or is it too much to ask for!
Last edited by surya2cents
on February 21st, 2014, 11:00 pm, edited 1 time in total.