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

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

In addition, you might take a look at

https://github.com/OpenSourceRisk/Engine/blob/master/QuantExt/qle/termstructures/blackvolsurfacebfrr.cpp

which is not QuantLib, but uses Dimitri's DeltaVolQuote and
BlackDeltaCalcuator at its heart to construct a vol smile from 10 and 25 BF
/ RR quotes, so there might be some inspiration there for you.

Best Regards
Peter

On Wed, 16 Feb 2022 at 14:41, Luigi Ballabio <lui...@gm...>
wrote:

> 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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