Re:Negative Rates Are Rewriting the Rules of Modern Finance
by lucozade on Monday September 30, 2019 @12:47PM
(#21117248)
The vanilla European swaptions market has always quoted wrt the Black model. If you strip out the hyperbole, I think this article is suggesting that they're looking for a cheap and cheerful model that accepts negative forwards.
It's somewhat orthogonal to how financial organisations actually fair value their rates volatility. All the market makers had to move away from log normal vols years ago as negative forwards have been around for a long time in other currencies.
It's somewhat orthogonal to how financial organisations actually fair value their rates volatility. All the market makers had to move away from log normal vols years ago as negative forwards have been around for a long time in other currencies.