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Building a cap/floor vol surface

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Building a cap/floor vol surface

Lapin
92 posts
All,

I need some guidance for the following problem:

1- Everything works fine for both OptionStrippers (1 &  2), as long as the ATM Rates fall within the range of the strikes of the optionstripper1.
Given current market conditions, the ATM Rate for short term is outside usual market quotes (above 1.00% strikes).

How would you tackle this issue in order to have a correct vol surface for cap/floors?

Thanks