Blending Methodology for Settling Swaption Volatility Cube and Prices

摘要

Systems and methods are provided for determining volatility levels for swaptions. End of day volatility data from swaption dealers. The data may be blended to obtain averaged data and then a modified SABR model may be used to fit a smile to the data points. The modified SABR model models density instead of implied volatility.

主权项

1. A method of determining volatility levels for swaptions, comprising:
(a) receiving end of day volatility data from swaption dealers; (b) determining average and dispersion values from the end of day volatility data; and (c) determining volatility levels by applying a modified SABR model that models density instead of implied volatility to the end of day volatility data.