Hints and tips:
...This is the world of Steve Blyth’s book, An Introduction to Quantitative Finance, where financial assets are stripped down into underlying cash flows and derivatives such as forwards, caps and swaptions....
...Perhaps the level of implied volatility in swaptions may be a good way to see how financial life is really evolving....
...A swaption gives the holder the right but not the obligation to enter into an underlying swap....
...Making markets in SOFR-linked interest rate volatility products (including swaptions, caps, and floors) 3....
...And longer term derivatives known as swaptions show that investors think this tranquillity will last for the foreseeable future....
...Swaptions give a trader the right, but not the obligation, to open an interest rate swap while caps and floors pay buyers if the interest rate is outside the band of an agreed strike price....
...The actual, realised volatility of the 10-year Treasury yield is near its pre-crisis lows, and longer-term “swaptions” show that investors think this tranquility will last for the foreseeable future....
...The researchers measured the algos’ predictive power in the markets for 10-year Treasuries, swap spreads and 10-year swaptions volatility....
...Basel regulations target the gross value of derivative portfolios of which swaptions are a part....
...While other services have been focused on the biggest market, interest rate swaps, BGC has gone for hard-to-value swaptions....
...run by CME Group, LCH and Germany’s Eurex say they are preparing to process a host of instruments for which there is no clearing mandate — like repo trades, foreign exchange non-deliverable forwards and swaptions...
...Credit default swaptions give market participants the right but not the obligation to enter into a credit default swap (CDS)....
...The industry already has products to hedge the underlying bond market; credit default swap options, or “swaptions”, total return swaps and now also exchange traded funds....
...That would still leave an estimated $170tn in notional value of uncleared trades in the market, including cross-currency swaps, swaptions and inflation swaps....
...Still, the divergence between equity market volatility and indicators of US and European bond market volatility, based on options and swaptions (options to buy swaps), remains striking....
...is in the process of formalising rules regarding margin for the estimated $170tn in notional value of uncleared trades that are still expected to be left in the market, including cross-currency swaps, swaptions...
...Equities have seen some pick-up in volatility, but the VIX at sub 14 is very low relative bond/swaption vol. Gold vol is going nowhere....
...They include cross-currency swaps, swaptions and inflation swaps, widely used by end-users to closely match and offset exposures they face....
...Such swaptions allow investors to protect their portfolios from large movements in markets, known as “tail risk”....
...Trading volumes of the instruments — known as credit index options or swaptions — have jumped 148 per cent in the past 12 months, with about $1.4tn of the instruments exchanging hands in 2014 compared with...
...The jump is also bigger proportionally than what is occurring in equity and some rate markets, as VIX and US swaption vol continue to respect their summer ranges (mainly bund swaption vols are rallying)....
...“It’s something that the industry is still figuring out for interest rate swaptions and similarly for CDS index options.”...
...“We have a lot of derivatives; swaps, swaptions etc. The costs of doing what we do through central clearing would be much higher because the collateral requirements are much higher,” says Mr Clarke....
...Mr Coomber says: “Our clients are interested in a combination of equity put options, bond call options and swaptions that can protect against scenarios, including a significant equity market fall or a prolonged...
...Compounding the differences of opinion with LDI managers, Alasdair MacDonald, head of investment strategy at Towers Watson, suggests that longevity swaps, options and swaptions can be seen “as a way of outsourcing...
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