Flat First Period
Key Flat First Period in CapFlr Vol Spec refers to an optional boolean that affects the vol assigned to those optionlets whose expiries occur before the expiry of the last optionlet contained in the shortest cap of the market cap quotes supplied in Vol Table
If omitted, the default is TRUE, which forces all early occurring optionlets to have the same vol as the last optionlet of the shortest cap.
If set to FALSE, the vols of the early optionlets are calculated by interpolation.
The setting here has no effect if the market quotes include the shortest possible cap.
For example, there will be no effect if the Vol Table includes the quote of the 6M cap and the caps reference the 3M Libor, since then the first optionlet involved in the bootstrapping process expires in 3 months, which is also the expiry of the last optionlet in the 6M cap.
The situation would be different if the shortest cap in the Vol Table were the 9M cap because that cap's latest optionlet would expire in 6 months and there would be the question of how to calculate during the bootstrapping process the first occurring optionlet expiring in 3 months.