IMPLIED SWAPTION VOLATILITY ITERATION PROCEDURE



Financial solutions home page

  1. Log into your account or if you are a new user, register your account and enable two factor authentication.
  2. Click on the Implied-swaption-volatility button, this will take you to the Dynamic-text-blocks parameters page.

Dynamic text-blocks parameters page

  1. Select the type of swap option whose volatility you want to imply. This can either be a pay-fixed swap option or a receive-fixed swap option.
  2. Enter the term of the swap underlying the swap option in years.
  3. Enter the underlying swap payment frequency per year.
  4. Enter the option expiry period in years.
  5. Click the submit button, and this will take you to the array populating page.

Array populating page

  1. Enter zero rates convertible swap payment frequency times per year at indicated payment times.
  2. Click the submit button, and this will take you to the implied swaption volatility parameters page.

Implied swaption volatility parameters page

  1. Select the name of currency of valuation from the drop-down list.
  2. Enter the swap option strike rate convertible swap payment frequency times per year.
  3. Enter underlying swap notional principal.
  4. Enter swap option price inclusive of allocated expenses and tax, and profit-loading.
  5. Enter allocated expenses and tax to be added to the pure swap option price.
  6. Enter profit percentage to be loaded to the calculated sum of pure swap option price and dealing expenses and tax. If the profit-loading is x and the sum of pure swap option price plus expenses and tax is P, then the final price will be calculated as (1 + x)*P.It is important to note that valuation is done from a dealer/broker's perspective. The profit-charge is charged by the dealer/broker.
  7. Click the submit button and this will take you to the output display page.

Output display page

  1. You can view pricing model output together with input parameters you entered.
  2. At the bottom of the page you can click on the button to create database record for the current model output. This will take you to the create database record page where you should click on the create button to create the database record.
  3. After clicking on the create button to create the database record, you will be taken to the database records view page, where you can scroll vertically or horizontally to view database records including the one you just created.
  4. You can filter database records according to the currency of valuation using the filter box. You can click on the details link on the extreme right of a particular database record, this will take you to the particular database record details page.