We revisit the problem addressed in Gatarek et al. and derive an algorithm for determining the Chayette local volatility based on the options marked for fixed-tenor rolling maturity swaptions. Apart from the discretization error inherent in calibration-simulation procedures, the formula...

We provide an alternative proof of monotonicity of normalizing volatility transforms (NVTs) due to Fukasawa (2012), and then obtain a general formula for volatility surface for which the NVTs are increasing. This is used to obtain several results related to butterfly arbitrage and asymptotic...