Resources

The pricing of exotic interest rate products cannot ignore the so called market volatility cube that is made daily available by several swaption brokers.Traders often use the SABR Stochastic volatility model in order to estimate vols off the provided grid.In this article I will show you how to price an out-of-the-money swaption by applying SABR cal...

The Chicago Mercantile Exchange (CME) clears European swaption trades on 3-month USD LIBOR since April 2016 and has thus become the first major exchange that lists Over-The-Counter (OTC) interest rate products with optionality.The standardized swaption contracts have 5 different expiries - 1M, 3M, 6M, 1Y, 2Y – and 7 underlying swap tenors - 1Y, 2Y,...

Most people are unaware of the fact that free and open source QuantLib comes with a great variety of modelling approaches when it comes to pricing an interest rate European swaption in Excel that surpasses what is offered by expensive commercial products.In fact, 14 different modelling approaches are implemented, whereby the Black approach does not...