SYNTHETIC CAPLET AND SWAPTION PRICES

This directory contains a number of synthetic forward prices of at the money caplets and swaptions computed in either a drifltess (DL) or a predictor-corrector (PC) Libor Market Model.

In all cases the analytic approximations for the prices have been used. The Libor factorloadings are based on all combinations of volatility surfaces (CONST, JR, M) and correlation types (JR, CS) and have been generated by the method LiborFactorLoading::sample which provides default values for most parameters.

The prices are intended to be used for cross calibration experiments (between differently configured LMMs).

The data format is as follows:

Caplets: one per line: i strike forward price
Swaptions: one per line: p q strike forward price

This is the format which the class LiborCalibrator expects. Here Caplet(i) is a caplet on the interval [T_i,T_{i+1}] and Swaption(p,q) exercises at time T_p into a swap on the interval [T_p,T_q]. The files contain the prices of all caplets Caplet(i) and coterminal swaptions Swaption(i,n) which exercise into a swap terminating at the horizon T_n where i=1,...,n-1.

File names have the form

InstrumentIn-(LmmType)-dim(n)-(VolSurfaceType)-(CorrelationType).txt,
where

n	dimension (number of Libor accrual intervals)
Instrument	"Caplets", "Swaptions"
LmmType	"DL" (DriftlessLMM), "PC" (PredictorCorrectorLMM)
VolSurfaceType	"CONST", "JR", "M" (see class VolSurface)
CorrelationType	"JR", "CS" (see class Correlations)

Thus for example CapletsIn-DL-dim40-JR-CS.txt is the file containing the caplet prices computed in a DriftlessLMM of dimension 40 (40 accrual periods) with Jaeckel-Rebonato (JR) volatility surface and Coffee-Shoenmakers (CS) correlations.

The calibration routine expects such a file and the corresponding file with swaption prices (in the same dimension -- not checked!) in the directory $DEV_ROOT/src/martingale and then writes corresponding files CapletsOut, SwaptionsOut with the relative calibration errors in percent.