  Local Volatility (LV) is a very powerful tool for market modeling. This tool
can be used to generate arbitrage-free scenarios calibrated to all available
options. Here we demonstrate how to implement LV in order to reproduce most
swaption prices within a single model.
  There was a good agreement between market prices and Monte Carlo prices for
all tenors and maturities from 2 to 20 years. Note that due to the use of a
normal distribution in the scenario generation process, the volatility of
short-term swaptions cannot be generated accurately.
