Use two different methods to calibrate the SABR stochastic volatility model from market implied Normal (Bachelier) volatilities with negative strikes. Both approaches use the SABR analytic pricer. When the Beta parameter of the SABR model is set to zero, the model is a Normal SABR model, which allows computing the implied Normal volatilities for negative strikes.

Use two different methods to calibrate a SABR stochastic volatility model from market implied Black volatilities. Both approaches use the SABR analytic pricer.

Price a swaption using the SABR model. First, you construct a swaption volatility surface from market volatilities by calibrating the SABR model parameters separately for each swaption maturity using the SABR analytic pricer. You then compute the swaption price by using the implied Black volatility on the surface with the SABR analytic pricer.

Calibrate model parameters for a Swaption instrument when you use a SABR pricing method.

Compute a USD LIBOR fallback. Regulators and industry groups have recommended that firms transition away from the London inter-bank offered rate (LIBOR) and prepare to replace them with overnight Alternative Reference Rates (ARRs). What happens to contracts with a notional value of trillions of dollars if they refer to a benchmark that no longer exists? If the LIBOR benchmark is no longer published, references to that benchmark rate must change and benchmark rates “fall back” to a new benchmark in contracts. For example, if a 30-year floating-rate instrument with a three-month coupon based on the LIBOR rate is created in 2008 and expires in 2038, then the rate will need to change in 2023 because in 2023, the publication of a LIBOR rate permanently ceases. To calculate three-month coupon payments after 2023, you must use a LIBOR fallback. This example is based on the ISDA® 2020 IBOR Fallbacks Protocol.

Use finportfolio and pricePorfolio to create and price a portfolio of interest-rate and equity instruments. The portfolio contains a vanilla FixedBond, an OptionEmbeddedFixedBond, a Vanilla European call option, a Vanilla American call option, and an Asian call option.

Use a Portfolio object to construct an optimal portfolio of 10, 20, and 30 year treasuries that will be held for a period of one month. The workflow for the overall asset allocation process is:

Select the cheapest-to-deliver (CTD) bond for Treasury bond future contracts using a BondFuture instrument. It demonstrates two workflows for selecting the CTD bond: