Gsr model calibration

[Ghorpadkar, Suhas]

I am trying to calibrate Gsr model to a vanilla swaption vol surface. I have reviewed the excellent blog at https://quantlib.wordpress.com/tag/gsr-model/

But it seems like, in the blog article, the model was calibrated to Bermudan swaption vols as I see step dates (or exercise dates) being provided to the model.

I have vols for European vanilla swaptions so I guess there is only one exercise date which is the maturity. I am not sure what needs to be passed to the model as step dates in my case. Also, I think I completely missed the point of using BasketGeneratingEngine and how model is calibrated to the basket of swaptions that are generated. Do I need to use the BasketGenerationEngine as I already have market vols ?

 

Thank you in advance,

 

Suhas

 

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[Peter Caspers-4]

Hi Suhas,

the model ist calibrated to European swaption vols, but since we calibrate to more than one option tenor we need a piecewise model volatility to match each instrument within the same model.

Given an exotic swaption (e.g. a Bermudan swaption, possibly with accreting or amortising notional, step up coupons etc.) the basket generating engine can create a basket of calibration instruments “suitable" for the exotic, see here

https://quantlib.wordpress.com/2015/03/29/gaussian-models/

and

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2320759

Best Regards

Peter

On 15 Feb 2017, at 16:55, Ghorpadkar, Suhas <[hidden email]> wrote:

I am trying to calibrate Gsr model to a vanilla swaption vol surface. I have reviewed the excellent blog athttps://quantlib.wordpress.com/tag/gsr-model/

But it seems like, in the blog article, the model was calibrated to Bermudan swaption vols as I see step dates (or exercise dates) being provided to the model.

I have vols for European vanilla swaptions so I guess there is only one exercise date which is the maturity. I am not sure what needs to be passed to the model as step dates in my case. Also, I think I completely missed the point of using BasketGeneratingEngine and how model is calibrated to the basket of swaptions that are generated. Do I need to use the BasketGenerationEngine as I already have market vols ?

 

Thank you in advance,

 

Suhas

 

............................................................................

For further important information about AllianceBernstein please click here
http://www.abglobal.com/disclaimer/email/disclaimer.html

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