Related papers: A rough SABR formula
In the current literature, the analytical tractability of discrete time option pricing models is guaranteed only for rather specific types of models and pricing kernels. We propose a very general and fully analytical option pricing…
A very simple closed-form formula for Sheppard's corrections is recovered by means of the classical umbral calculus. By means of this symbolic method, a more general closed-form formula for discrete parent distributions is provided and the…
The research presented in this article provides an alternative option pricing approach for a class of rough fractional stochastic volatility models. These models are increasingly popular between academics and practitioners due to their…
We provide the integral representation formula for the relaxation in $BV(\Omega; \mathbb{R}^M)$ with respect to strong convergence in $L^1(\Omega; \mathbb{R}^M)$ of a functional with a boundary contact energy term. This characterization is…
Instantaneous volatility of logarithmic return in the lognormal fractional SABR model is driven by the exponentiation of a correlated fractional Brownian motion. Due to the mixed nature of driving Brownian and fractional Brownian motions,…
This paper proposes a hybrid methodology to improve the approximation of SABR (Stochastic Alpha Beta Rho) implied volatility by combining analytical structure with machine learning. The approach augments the neural-network input…
We establish Ecalle's mould calculus in an abstract Lie-theoretic setting and use it to solve a normalization problem, which covers several formal normal form problems in the theory of dynamical systems. The mould formalism allows us to…
We suggest an intermediate currency approach that allows us to price options on all FX markets simultaneously under the same risk-neutral measure which ensures consistency of FX option prices across all markets. In particular, it is…
We analyze the VIX futures market with a focus on the exchange-traded notes written on such contracts, in particular we investigate the VXX notes tracking the short-end part of the futures term structure. Inspired by recent developments in…
How to reconcile the classical Heston model with its rough counterpart? We introduce a lifted version of the Heston model with n multi-factors, sharing the same Brownian motion but mean reverting at different speeds. Our model nests as…
We use commutator techniques and calculations in solvable Lie groups to investigate certain evolution Partial Differential Equations (PDEs for short) that arise in the study of stochastic volatility models for pricing contingent claims on…
We consider accelerated versions of the operator Sinkhorn iteration (OSI) for solving scaling problems for completely positive maps. Based on the interpretation of OSI as alternating fixed point iteration, it has been recently proposed to…
Recent mathematical advances in the context of rough volatility have highlighted interesting and intricate connections between path-dependent partial differential equations and backward stochastic partial differential equations. In this…
Pseudospectral approximation provides a means to approximate the dynamics of delay differential equations (DDE) by ordinary differential equations (ODE). This article develops a computer-aided algorithm to determine the distance between the…
Approximate model counting for bit-vector SMT formulas (generalizing \#SAT) has many applications such as probabilistic inference and quantitative information-flow security, but it is computationally difficult. Adding random parity…
Exactly solvable variable parametric Burgers type equations in one-dimension are introduced, and two different approaches for solving the corresponding initial value problems are given. The first one is using the relationship between the…
First, we show that implied normal volatility is intimately linked with the incomplete Gamma function. Then, we deduce an expansion on implied normal volatility in terms of the time-value of a European call option. Then, we formulate an…
We give a development of the ODE method for the analysis of recursive algorithms described by a stochastic recursion. With variability modelled via an underlying Markov process, and under general assumptions, the following results are…
This paper derives a new semi closed-form approximation formula for pricing an up-and-out barrier option under a certain type of stochastic volatility model including SABR model by applying a rigorous asymptotic expansion method developed…
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. The result is valid for all values of the correlation…