Class DirectIborCapletFloorletFlatVolatilityCalibrator

  • public class DirectIborCapletFloorletFlatVolatilityCalibrator
    extends Object
    Caplet volatilities calibration to cap volatilities.

    The volatilities of the constituent caplets in the market caps are "model parameters" and calibrated to the market data under the penalty constraint. The penalty is based on the second-order finite difference differentiation along the expiry dimension.

    The resultant volatility type is the same as the input volatility type. e.g., Black caplet volatilities BlackIborCapletFloorletExpiryFlatVolatilities are returned if Black cap volatilities are plugged in, and normal caplet volatilities NormalIborCapletFloorletExpiryFlatVolatilities are returned otherwise.

    The calibration is conducted once the cap volatilities are converted to cap prices. Thus the error values in RawOptionData are applied in the price space rather than the volatility space.