Main category
Economics (General Management)
Abstract
We present an approach that calculates the HW volatility to make the swaption price calculated on a HW tree match Black's price for the same swaption at each grid point. At each grid point, we compared respective Black’s and HW trinomial tree payer swaption pricing benchmarks. Specifically, using the interest rate and implied Black’s volatility.
Further reading
https://ia904705.us.archive.org/20/items/hw-vol/HwVol.pdf
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