Cap&Floor: benchmark pricing model

Hymn · April 4th, 2016, 12:30 pm

Hi,in a context of negative interests what kind of pricing model are you using to price the cap&floor instruments? And about the market data, especially the volatitlity?Today, more instruments have embedded a floor instrument with strike 0, how to price the embedded derivative?Thanks

Jhammer · April 4th, 2016, 2:05 pm

How about Normal or shifted Lognormal? This could be useful for you: http://www.wilmott.com/messageview.cfm? ... adid=98307