You are trading caps, and your no arbitrage model provides the dollar prices for caps in Table

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You are trading caps, and your no arbitrage model provides the dollar prices for caps in Table 20.7. Convert the dollar prices into quoted flat volatilities.
Table 20.7

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Fixed Income Securities Valuation Risk and Risk Management

ISBN: 978-0470109106

1st edition

Authors: Pietro Veronesi

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Question Posted: Jun 16, 2016 01:32 AM

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You are trading caps, and your no arbitrage model provides the dollar prices for caps in Table

Question:

Maturity Swap Rate (%) Cap Price (x100) 3M (LIBOR) 1Y 2Y 3Y 4Y 5Y 4.3000 4,8000 4.9040 4.9580 4.9890 5.0325 5.0895 5.1720 0.5734 1.7414 2.4307 3.8679 6.0648 10Y

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Fixed Income Securities Valuation Risk and Risk Management

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