Re: [Quantlib-users] Pricing of CAP and Swaption with Quantlib

[Peter C. <pca...@gm...>]

Hi Christofer,

we have added a pricer here

https://github.com/OpenSourceRisk/Engine/blob/master/QuantExt/qle/cashflows/blackovernightindexedcouponpricer.hpp

inspired by Lyanshenko / Mercurio, Looking forward to backward looking
rates, section 6.3. Currently there are only the old Libor
volatilities available as far as I know. I'd expect that there will be
new volatility quotes in the future and some sort of market formula
that translates those into standard cap prices. Therefore the
implementation should be seen as preliminary and proprietary, there
are other possible approaches. We'll update the method as soon as the
market develops. I should also mention that there is a bug in the
github code, line 70 in the cpp should be

        Real stdDev = sigma * std::sqrt(std::max(fixingStartTime, 0.0) +
                                        std::pow(fixingEndTime -
std::max(fixingStartTime, 0.0), 3.0) /
                                            std::pow(fixingEndTime -
fixingStartTime, 2.0) / 3.0);

which will be in the next ORE release. We also added daily (or
"local") cap / floor pricing for ON coupons, which will be available
in that release as well. Hope that helps in one way or the other. Any
feedback or discussions around this topic are welcome!

Thanks
Peter

On Wed, 17 Mar 2021 at 18:39, Christofer Bogaso
<bog...@gm...> wrote:
>
> Hi,
>
> I am just wondering if there is any implementation to price some
> Interest Rate Caps and Swaptions where payoff is based on Overnight
> rate contrary to present Libor references.
>
> So far I can only see QL implementation based on Libor.
>
> Any reference to OI based pricing would be appreciated.
>
> Thanks and regards,
>
>
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