Page 1 of 1
SABR/LMM : correlation between the volatily of foward rates
Posted: April 21st, 2015, 8:10 am
by wallaeys
Hello,I am using the book "SABR/LMM" written by Rebonato.The correlation between forward rates : same approach as in a classical LMM model (ok)The correlation between forward rates and volatility : exogenously given by the market data (through the calibration)What about the correlation between the volatility ?What are the classical approaches ? Thank you for your time
SABR/LMM : correlation between the volatily of foward rates
Posted: April 22nd, 2015, 6:57 pm
by Phunfactory
The issue isn't well described in Rebonatos book. However there is a thesis out there which tells you how it works. You can obtain the Vol/Vol correlations from fitting Swap or CMS dynamics in your SABRLMM.
SABR/LMM : correlation between the volatily of foward rates
Posted: May 26th, 2015, 2:53 pm
by clw
Hi,We describe a couple of methods of its calibration in our soon to be published book . For one of the two we also provide calibration examples done on real market data.