Forums  > Pricing & Modelling  > Bermudan swaptions in practice  
     
Page 2 of 2Goto to page: 1, [2] Prev
Display using:  

kikiki


Total Posts: 2
Joined: Jun 2017
 
Posted: 2017-09-19 21:22
Thanks, mtsm. So in terms of Berms, a model is used to separate the Berm specific risk(from curve-delta and european-vega) and acts as a ruler to give you a measure of that risk.

But in practice, usually how do you formulate your price with the help of model and discount mechanism? You mentioned mean-reversion spreads. Does that mean some market participants add a spread to mean-reversion according their view, then re-calibrate the model to europeans to get a price? Do you also use that spread in model to calculate greeks?

I think discount mechanism may be not outside of the model(akimon said in the 3rd p). It should to be incorporated back to model and re-match europeans as those greeks should also take into account the discount. I heard some traders use vol shift, which is wrong I think. Maybe I misunderstood what vol shift means.
Previous Thread :: Next Thread 
Page 2 of 2Goto to page: 1, [2] Prev