A rough SABR formula
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Publication:2170291
DOI10.3934/FMF.2021003zbMATH Open1498.91468arXiv2105.05359OpenAlexW3172608759MaRDI QIDQ2170291FDOQ2170291
Jim Gatheral, Masaaki Fukasawa
Publication date: 30 August 2022
Published in: Frontiers of Mathematical Finance (Search for Journal in Brave)
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.
Full work available at URL: https://arxiv.org/abs/2105.05359
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Cites Work
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Cited In (7)
- On the Skew and Curvature of the Implied and Local Volatilities
- 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
- 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
- A partial rough path space for rough volatility
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