8. Swaptions are options on interest-rate swaps that are being priced using an extension of the classic Black-Scholes model, see Fischer Black and Myron Scholes, “The Pricing of Options and Corporate Liabilities,” Journal of Political Economy 83 (1973), pp. 637-654. The volatility input in the Black-Scholes model that is consistent with the market price of such swaptions is commonly referred to as Black volatility. Swaptions are specified with two parameters, the tenor of the option and the maturity of the underlying swap. Therefore, the set of swaptions traded in the market is represented with a two-dimensional matrix, hence the term volatility surface.