The Swaption Volatility Surface page displays the volatility surface for swap-based vanilla s.
The volatility surface itself consists of mid-market implied volatilities. Each implied volatility displayed is calculated by SDX Interest Rates by calibrating its skew model to market volatilities/prices for multiple strikes.
It includes the following data:
Vol %
Vol % is 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 prices the log normal volatility as presented in the volatility surface is the implied log normal volatility calculated from the option’s observed price using the Black-Scholes model.
Normal Vol
Normal Vol shows the expected future fluctuations in terms of basis points rather than in terms of the logarithmic returns. Its calculation assumes that rates are normally distributed.
This volatility is also referred to by market practitioners as the “bp Vol”.
It is important to note that the data presented is a single two dimensional slice of the actual three dimensional implied volatility cube. You can choose to view these slices in two different orientations:
All underlyings (i.e., swap lengths) and all strikes for a single expiration.
All expirations and all strikes for a single underlying (i.e., swap length).
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.
Although currently in this page you cannot edit the volatility surface, in both the pricing pages, for a vanilla swaption or any of the supported swaption strategies, you can modify the volatility curve that will be used to price a specific instrument for the defined expiry and tenor only. For more information see Viewing & Editing the Swaption Volatility Skew for Individual Instruments .
The Swaption Volatility Surface is accessed by:
Clicking the Vol/Price Surfaces tab > Swaption tab on the left-hand menu.
On the ribbon bar in the Trader tab or the Market Data tab clicking the Vol/Price Surfaces button and then Swaption.
From the Open button > Vol/Price Surfaces > Swaption.
The following topics are covered:
Fields & Buttons in the Swaption Volatility Surface
What Can be Done in the Swaption Volatility Surface?
Customizing the Volatility Surface