Related papers: Option pricing under the normal SABR model with Ga…
Gulisashvili et al. [Quant. Finance, 2018, 18(10), 1753-1765] provide a small-time asymptotics for the mass at zero under the uncorrelated stochastic-alpha-beta-rho (SABR) model by approximating the integrated variance with a moment-matched…
We propose an efficient, accurate and reliable simulation scheme for the stochastic-alpha-beta-rho (SABR) model. The two challenges of the SABR simulation lie in sampling (i) integrated variance conditional on terminal volatility and (ii)…
The SABR model is a benchmark stochastic volatility model in interest rate markets, which has received much attention in the past decade. Its popularity arose from a tractable asymptotic expansion for implied volatility, derived by heat…
In this study, we generate a large number of implied volatilities for the Stochastic Alpha Beta Rho (SABR) model using a graphics processing unit (GPU) based simulation and enable an extensive neural network to learn them. This model does…
We describe a high performance parallel implementation of a derivative pricing model, within which we introduce a new parallel method for the calibration of the industry standard SABR (stochastic-\alpha \beta \rho) stochastic volatility…
We examine in this article the pricing of target volatility options in the lognormal fractional SABR model. A decomposition formula by Ito's calculus yields a theoretical replicating strategy for the target volatility option, assuming the…
Accurately characterizing the implied volatility curves is a central challenge in option pricing and risk management. The classical SABR model by Hagan et al. has been widely adopted in practice due to its well-defined stochastic volatility…
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…
The SABR model is shortly presented and the volatility swap explained. The fair value for a volatility swap is then computed using the usual theory in financial mathematics. An analytical solution using confluent hypergeometric functions is…
We derive analytic formulae which link $\alpha$, $\nu$ and $\rho$ parameters in Andreasen-Huge style SABR model to the ATM price and option prices at four strikes close to ATM. Based on these formulae we give a characterisation for the SABR…
In this article, we show how the scaling symmetry of the SABR model can be utilized to efficiently price European options. For special kinds of payoffs, the complexity of the problem is reduced by one dimension. For more generic payoffs,…
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…
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 refine the analysis of hedging strategies for options under the SABR model carried out in [2]. In particular, we provide a theoretical justification of the empirical observation made in [2] that the modified delta ("Bartlett's delta")…
We construct a statistical indicator for the detection of short-term asset price bubbles based on the information content of bid and ask market quotes for plain vanilla put and call options. Our construction makes use of the martingale…
For option pricing models and heavy-tailed distributions, this study proposes a continuous-time stochastic volatility model based on an arithmetic Brownian motion: a one-parameter extension of the normal stochastic alpha-beta-rho (SABR)…
The paper investigates the performance of the European option price when the log asset price follows a rich class of Generalized Tempered Stable (GTS) distribution. The GTS distribution is an alternative to Normal distribution and…
We study the pricing of VIX options in the SABR model $dS_t = \sigma_t S_t^\beta dB_t, d\sigma_t = \omega \sigma_t dZ_t$ where $B_t,Z_t$ are standard Brownian motions correlated with correlation $\rho<0$ and $0 \leq \beta < 1$. VIX is…
Options are financial instruments that depend on the underlying stock. We explain their non-Gaussian fluctuations using the nonextensive thermodynamics parameter $q$. A generalized form of the Black-Scholes (B-S) partial differential…
This study introduces a SABR-informed multitask Gaussian process for constructing implied volatility surfaces from sparse option quotes. We treat a dense synthetic dataset generated by a calibrated SABR model as the source task and market…