SwaptionVolCube and SwaptionVolCube2

[Ramon Lozano]

Hi,

    I have a couple of questions regarding the proper initialization of SwaptionVolCube2. The constructor of SwaptionVolCube2 is as follows:

SwaptionVolCube2(
            const Handle<SwaptionVolatilityStructure>& atmVolStructure,
            const std::vector<Period>& optionTenors,
            const std::vector<Period>& swapTenors,
            const std::vector<Spread>& strikeSpreads,
            const std::vector<std::vector<Handle<Quote> > >& volSpreads,
            const boost::shared_ptr<SwapIndex>& swapIndexBase,
            const boost::shared_ptr<SwapIndex>& shortSwapIndexBase,
            bool vegaWeightedSmileFit);

My questions are:

1. What is swapIndexBase ? Does swapIndexBase represent the underlying swaps for the quoted vols in the swaption vol cube?
3. What is shortswapIndexBase ?

I looked at swaptionvolcube.cpp where it is used and cannot figure out from the code what exactly these two parameters represent.

thanks
ramon

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[Ferdinando M. Ametrano-3]

On Wed, Sep 7, 2011 at 10:19 AM, Ramon Lozano <[hidden email]> wrote:
>     I have a couple of questions regarding the proper initialization of
> SwaptionVolCube2. The constructor of SwaptionVolCube2 is as follows:
> [...]
> 1. What is swapIndexBase ? Does swapIndexBase represent the underlying swaps
> for the quoted vols in the swaption vol cube?
> 3. What is shortswapIndexBase ?

the swaption vol cube is made up of ordered swaption vol surface
layers, each layer referring to a swap index of a given length in
year, all indexes belonging to the same family. In order to identify
the family (and its market convention) an index of whatever length
from that family must be passed in as swapIndexBase.

Often for short swap length the swap index family is different, e.g.
the EUR case: swap vs 6M Euribor is used for length>1Y, while swap vs
3M Euribor is used for 1Y length.
The  shortSwapIndexBase is used to identify this second family

ciao -- Nando

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Using storage to extend the benefits of virtualization and iSCSI
Virtualization increases hardware utilization and delivers a new level of
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