Swaption - Vol Surface Underlying

The Swaption underlying can be used in construction of the RATE volatility surfaces.

Swaption Configuration

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Create the Rate Index Definition in from the Calypso Navigator.

1. Swaption Volatility Surface Underlying

Create the underlying instruments in the Volatility Surface Underlying Window, Swaption panel.

Click New to create new volatility surface underlying.

Complete the details as described in the table below.

Click Save to create the underlying. They appear in the table below.

The system creates quotes like in the following example.

Fields Details

Field

Description

Currency

Base currency selected in the Currency drop-down list in the bottom of the window.

Rate Index

Select the rate index.

Index Tenor

Tenor for the index.

Source

Quoting source for the index.

Option Expiry

Tenor for the option expiry.

Swap Maturity

Maturity for the swap.

Pay Fixed

Select the cash settlement method in order to affect the calculation of the value of the underlying when generating the surface.

Create Multiple Rates

You can click Create Multiple Rates to create multiple rates for instruments in the Multiple Rates window.

Select one or more tenors and move them to the tenor field to the right. To create custom tenors, add a number in the text field, select either Day, Week, Month, or Year in the drop-down list, and click Add Custom Tenor. The tenors are added to the tenor field.

Under "Rate," add a value and click Add to move the value to the Rate field below.

To create multiple rates, select and highlight the preferred tenors and rates added in steps above, then use the arrow button to move them into the Expiries structure. When the structure is complete, click OK. The multiple rates are added to the list of underlying instruments on the Swaption panel.

Ⓘ [NOTE: before creating multiple rates, make sure to specify other relevant information for the fixed and float side - such as currency, rate index, source, date roll, and holidays - on the Swaption panel.]

Create Multiple Expiries

You can click Create Multiple Expiries to create multiple instruments associated with the specified expiries.

Payment Lag

Enter the number of days between the interest date and the payment date, and specify Business or Calendar.

Cmp

Check the Cmp checkbox to enable interest compounding.

Select the DLY from the adjacent field.

Double-click the Flat label to toggle between:

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Flat — Flat compounding.

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Spread — Does not apply to fixed rates, only to floating rates.

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SimpleSpread - Does not apply to fixed rates, only to floating rates.

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NoCmp — A cashflow is created at the compounding period without actually compounding the interest.

There is no compounding otherwise.

Fixed Side

Rate

Enter the fixed interest rate in percentage.

Relative ATM

Select for relative at-the-money.

Frequency

Payment frequency.

Day Count

Select the daycount convention used for determining the periods.

Date Roll

Select the date roll convention to use when the date falls on a non-business day.

Holidays

Holiday calendars used in calculating the pay dates.

Float Side