Caplet stripping in the bwd-looking RFR world with/without maturity adjustment
KevinT
Since the beginning of this year, LIBOR rates have ceased in some markets like GBP, CHF, and JPY and rates pricing has moved into the RFR space, using compounded overnight rates as the underlying for cap-/floor(lets). My questions now are concerned with the building of a vol surface based on broker quotes of normal par vols (absolute strikes, yearly expiries, backward looking with quarterly compounding), and, in particular, caplet stripping: what is the correct approach to bootstrap implied capl