Re: [Quantlib-users] Constructing Smile Curve from Quoted Vols in QuantLib

[Luigi B. <lui...@gm...>]

Hello Goutham,
    I'm not very familiar with that part of the code, but I think you can
do something similar to what's done in the vanna-volga barrier engine:

https://github.com/lballabio/QuantLib/blob/master/ql/experimental/barrieroption/vannavolgabarrierengine.cpp#L97-L130

First, it uses the BlackDeltaCalculator class to calculate the strike
corresponding to the quotes (lines 97-113); then it creates an
interpolation between them (117-127; it uses vanna-volga interpolation, but
I guess you can choose another one if you want); then it extracts from the
interpolation the volatility corresponding to the option strike.

Hope this helps,
    Luigi



On Wed, Feb 16, 2022 at 10:28 AM Goutham Mahesh <gou...@gm...>
wrote:

> Hi all,
>
> I am pricing FX options and was going through the Quantlib Python Guide to
> assist me.
> I came to this section on DeltaVolQuotes:
>
> deltaType = ql.DeltaVolQuote.Fwd # Also supports: Spot, PaSpot, PaFwd
> atmType = ql.DeltaVolQuote.AtmFwd # Also supports: AtmSpot,
> AtmDeltaNeutral, AtmVegaMax, AtmGammaMax,␣
> ˓→AtmPutCall50
> maturity = 1.0
> volAtm, vol25DeltaCall, vol25DeltaPut = 0.08, 0.075, 0.095
> atmDeltaQuote = ql.DeltaVolQuote(ql.QuoteHandle(ql.SimpleQuote(volAtm)),
> deltaType, maturity, atmType)
> vol25DeltaPutQuote = ql.DeltaVolQuote(-0.25,
> ql.QuoteHandle(ql.SimpleQuote(vol25DeltaPut)), maturity,␣
> ˓→deltaType)
> vol25DeltaCallQuote = ql.DeltaVolQuote(0.25,
> ql.QuoteHandle(ql.SimpleQuote(vol25DeltaCall)), maturity,␣
> ˓→deltaType)
>
> I have the ATMf and 25DRR and 25D Fly quotes for various tenors as
> attached in the table below. My doubt is using the code above, is there any
> way I can construct the volatility smile curve using QuantLib to derive the
> implied volatility of an option.
>
> Vol Table:
> ATMF Vol 25D RR 25D Std 10D RR 10 Std
> Bid Ask
> 1m 6.1 6.45 0.25 0.5 0.05 0.15 0.45 0.9 0.16 0.48
> 2m 6.05 6.4 0.3 0.55 0.1 0.25 0.54 0.99 0.32 0.8
> 3m 6.05 6.3 0.35 0.6 0.15 0.35 0.63 1.08 0.48 1.12
> 6m 5.9 6.1 0.45 0.65 0.2 0.35 0.81 1.17 0.64 1.12
> 9m 5.9 6.1 0.45 0.7 0.2 0.35 0.81 1.26 0.64 1.12
> 1y 5.9 6.1 0.5 0.7 0.2 0.4 0.9 1.26 0.64 1.28
> 2y 5.5 6 0.3 0.7 0.25 0.55 0.54 1.26 0.8 1.76
> 3y 5.2 5.7 0.3 0.7 0.3 0.7 0.54 1.26 0.96 2.24
> 4y 5.1 5.6 0.1 0.7 0.35 0.85 0.18 1.26 1.12 2.72
> 5y 5 5.5 -0.1 0.4 0.5 0.9 -0.18 0.72 1.6 2.88
>
> Thank You,
> Best,
> Goutham
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