On asymptotically arbitrage-free approximations of the implied volatility
Mathematical Finance
2022-01-19 v2
Abstract
Following-up Fukasawa and Gatheral (Frontiers of Mathematical Finance, 2022), we prove that the BBF formula, the SABR formula, and the rough SABR formula provide asymptotically arbitrage-free approximations of the implied volatility under, respectively, the local volatility model, the SABR model, and the rough SABR model.
Cite
@article{arxiv.2201.02752,
title = {On asymptotically arbitrage-free approximations of the implied volatility},
author = {Masaaki Fukasawa},
journal= {arXiv preprint arXiv:2201.02752},
year = {2022}
}