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Model[CapFloor]__Pricing_Method

Pricing Method refers to List of available pricing methods.
Available Pricing Method types:
Bachelier
Minimum required license: Basic
Assumes that the underlying forward rate F follows the Bachelier process so that it is normally distributed at any future time.
Concretely F is diffused as dF = σdw in its martingale measure.
The QuantLib engine used is the BachelierCapFloor in the interest rate case and the YoYInflationBachelierCapFloor in the inflation case.
Black
Assumes that the underlying forward rate F follows the Black process so that it is lognormally distributed at any future time.
Concretely F is diffused as dF = σFdw in its martingale measure, where σ may be time dependent.
The QuantLib engine used is the BlackCapFloor in the interest rate case and the YoYInflationBlackCapFloor in the inflation case.
Black Displaced
Minimum required license: Student
Assumes that the underlying forward rate F follows the displaced Black process so that it is lognormally distributed with a horizontal shift at any future time.
Concretely F is diffused as d(F+θ) = σ(F+θ)dw in its martingale measure, which treats d(F+θ) as being always positive.
It follows that a positive θ results to an F at time T of which the lognormal distribution is shifted to the left by an amount equal to θ.
Note this model reduses to the Black model when θ = 0.
The QuantLib engine used is the BlackCapFloor with a non-trivial displacement amount in the interest rate case and the YoYInflationUnitDisplacedBlackCapFloor in the inflation case.