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Quantitative Finance · Glossaire

Qu'est-ce que « Volatility cube » ?

Definition 13.7 Markets II: Rates, FX and Credit · Chapitre 13 — The Rates Options Market

The volatility cube of a currency is the set of implied volatilities of its swaptions by expiry, tenor of the underlying swap and strike. Its at-the-money face, expiry by tenor, is the swaption matrix; the strike dimension is the smile.

Two faces of an illustrative dollar volatility cube: at-the-money normal volatility by expiry for three tenors (left), and the smile of the 1y×10y swaption by strike (right). The shapes, not the numbers, are the point. Data: the chapter’s tutorial.
Figure 13.5. Two faces of an illustrative dollar volatility cube: at-the-money normal volatility by expiry for three tenors (left), and the smile of the 1y×\times10y swaption by strike (right). The shapes, not the numbers, are the point. Data: the chapter’s tutorial.
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