Posted by
Ferdinando M. Ametrano-3 on
URL: http://quantlib.414.s1.nabble.com/OptionletStripper-question-tp5928p5929.html
Hi Nathan
> I am looking at the optionletStripper1 class. As an input it uses a
> volatility term structure. Inside of it, it converts these volatilities into
> prices. Here in the US the ICAP service provides me with prices and no
> longer with volatilities (i.e. a grid of cap prices for given maturities and
> strikes). Any suggestions on how to handle this?
>
> My first thought was to extend the optionletStripper1 class to accept a
> matrix of prices. Or the CapFloorTermVolSurface could be renamed such that
> it can also hold prices. Any pointers on how to implement this in a way such
> that it can become part of the library would be appreciated.
I had to stop my volatility coding due to more urgent (yield curve)
priorities, but you're right that prices should be supported; given
the recent yield curve turmoil, brokers are kinda shifting towards
prices instead of vols.
I haven't thought in detail about the issue but I see the optionlet
stripper classes as disposable helper classes (btw this is the reason
why they are not fully documented, as they might undergo some major
refactoring). I would probably focus on CapFloorTermVolSurface and
expanding their interface to fully support both prices and vols
inspectors. When it comes to choice between prices and vols as input
parameters I would probably settle for prices, delegating vol handling
to some adapter class which would then turn vols into prices.
ciao -- Nando
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