The Caplet Volatility Surface displays the volatility surface for caplets and floorlets. It consists of mid-market implied volatilities for caplets/floorlets.
It includes the following data:
Vol %
The Vol displays as a % the log normal volatility, which denotes the extent to which the returns of the underlying is expected to fluctuate in a given time period.
Given observed cap prices the caplet log normal volatility as presented in the caplet volatility surface is the implied log normal volatility of caplets whose prices are bootstrapped from the observed cap prices.
Normal Vol
Normal Vol shows the expected future fluctuations in terms of basis points rather than in terms of the logarithmic returns. That is, it is calculated on pure sample data that is assumed to be normally distributed.
This volatility is also referred to by market practitioners as the "bp Vol".
The building of the caplet/floorlet surface involves a multi-dimensional minimization of pricing errors obtained by fitting individual caplet/floorlet smiles at pillar expirations. The minimization is to market volatilities/prices from multiple strikes and tenors.
The data presented in these pages is obtained from multiple data sources. Initially when you open the page the real-time market data is displayed. However, the data displayed is not updated automatically.
By default, the Caplet Volatility Surface opens with the volatility surface for the current currency, trade date and market data cut-off time set in the Cap/Floor Volatility Surface from which it was opened. It is displayed for a default set of caplet/floorlet expiries, e.g., 3m-6m, 6m-9m, 9m-1y, etc.
The Caplet Volatility Surface is accessed from the Cap/Floor Volatility Surface by clicking the Caplet Volatility Surface button.
The following topics are covered:
Fields & Buttons in the Caplet Volatility Surface
What Can be Done in the Caplet Volatility Surface?