A rough SABR formula
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Abstract: Following an approach originally suggested by Balland in the context of the SABR model, we derive an ODE that is satisfied by normalized volatility smiles for short maturities under a rough volatility extension of the SABR model that extends also the rough Bergomi model. We solve this ODE numerically and further present a very accurate approximation to the numerical solution that we dub the rough SABR formula.
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Cites work
- Asymptotics and calibration of local volatility models
- Asymptotics for Rough Stochastic Volatility Models
- Computing the implied volatility in stochastic volatility models
- Hybrid scheme for Brownian semistationary processes
- On the short-time behavior of the implied volatility for jump-diffusion models with stochastic volatility
- Pricing under rough volatility
- Refinement by reducing and reusing random numbers of the hybrid scheme for Brownian semistationary processes
- Short-term at-the-money asymptotics under stochastic volatility models
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Cited in
(10)- A partial rough path space for rough volatility
- Semi-groups and the mean reverting SABR stochastic volatility model
- On the Skew and Curvature of the Implied and Local Volatilities
- Series expansion of the SABR joint density
- Approximation rates for deep calibration of (rough) stochastic volatility models
- On asymptotically arbitrage-free approximations of the implied volatility
- Option pricing in sandwiched Volterra volatility model
- On the approximation of the SABR model: a probabilistic approach
- A martingale method for option pricing under a CEV-based fast-varying fractional stochastic volatility model
- MARKOVIAN STOCHASTIC VOLATILITY WITH STOCHASTIC CORRELATION — JOINT CALIBRATION AND CONSISTENCY OF SPX/VIX SHORT-MATURITY SMILES
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