A Lower Bound for the Volatility Swap in the Lognormal SABR Model [PDF]
Axioms, 2023 In the short time to maturity limit, it is proved that for the conditionally lognormal SABR model the zero vanna implied volatility is a lower bound for the volatility swap strike.
Elisa Alòs +2 more
doaj +9 more sources
A note on the option price and ‘Mass at zero in the uncorrelated SABR model and implied volatility asymptotics’ [PDF]
Quantitative Finance, 2020 Gulisashvili et al. [Quant. Finance, 2018, 18(10), 1753–1765] provide short term asymptotics for the mass at zero under the uncorrelated stochastic-alpha-beta-rho (SABR) model by approximating the integrated variance with a moment-matched lognormal ...
Jaehyuk Choi, Lixin Wu
semanticscholar +12 more sources
ASYMPTOTICS OF THE TIME-DISCRETIZED LOG-NORMAL SABR MODEL: THE IMPLIED VOLATILITY SURFACE [PDF]
Probability in the Engineering and Informational Sciences, 2020 We propose a novel time discretization for the log-normal SABR model which is a popular stochastic volatility model that is widely used in financial practice. Our time discretization is a variant of the Euler–Maruyama scheme.
D. Pirjol, Lingjiong Zhu
semanticscholar +10 more sources
Mass at zero in the uncorrelated SABR model and implied volatility asymptotics [PDF]
Quantitative Finance, 2015 We study the mass at the origin in the uncorrelated stochastic alpha, beta, rho stochastic volatility model and derive several tractable expressions, in particular when time becomes small or large.
Archil Gulisashvili +2 more
semanticscholar +14 more sources
The Equivalent Constant-Elasticity-of-Variance (CEV) Volatility of the Stochastic-Alpha-Beta-Rho (SABR) Model [PDF]
SSRN Electronic Journal, 2019 This study presents new analytic approximations of the stochastic-alpha-beta-rho (SABR) model. Unlike existing studies that focus on the equivalent Black-Scholes (BS) volatility, we instead derive the equivalent volatility under the constant-elasticity ...
Jaehyuk Choi, Lixin Wu
semanticscholar +10 more sources
A LOW-BIAS SIMULATION SCHEME FOR THE SABR STOCHASTIC VOLATILITY MODEL [PDF]
International Journal of Theoretical and Applied Finance, 2012 The Stochastic Alpha Beta Rho Stochastic Volatility (SABR-SV) model is widely used in the financial industry for the pricing of fixed income instruments. In this paper we develop a low-bias simulation scheme for the SABR-SV model, which deals efficiently with (undesired) possible negative values in the asset price process, the martingale property of ...
Bin Chen, C. Oosterlee, H. V. D. Weide
semanticscholar +5 more sources
A Volatility-of-Volatility Expansion of the Option Prices in the SABR Stochastic Volatility Model [PDF]
International Journal of Theoretical and Applied Finance, 2014 We propose a new type of asymptotic expansion for the transition probability density function (or heat kernel) of certain parabolic partial differential equations (PDEs) that appear in option pricing.
O. Grishchenko, Xiao Han, V. Nistor
semanticscholar +3 more sources
Extension of SABR Libor Market Model to handle negative interest rates
Quantitative Finance and Economics, 2020 Variations of Libor Market Model (LMM), including Constant Elasticity of Variance-LMM (CEV-LMM) and Stochastic Alpha-Beta-Rho LMM (SABR-LMM), have become popular for modeling interest rate term structure.
Jie Xiong, Geng Deng, Xindong Wang
doaj +2 more sources
Asymptotic Implied Volatility at the Second Order with Application to the SABR Model [PDF]
, 2016 We provide a general method to compute a Taylor expansion in time of implied volatility for stochastic volatility models, using a heat kernel expansion.
BS DeWitt +6 more
core +2 more sources
On an Extension Multifractional SABR Model for Pricing Variance and Volatility Swaps
Asian Journal of Probability and StatisticsThis paper presents a robust methodology for the valuation of options on variance swaps and volatility swaps. While existing literature has often focused on the pricing of the swaps themselves under stochastic volatility models, the valuation of options ...
Abel Zongo, S. P. C. Nitiema
semanticscholar +2 more sources