Analytic Calibration in Andreasen-Huge SABR Model

K. E. Feldman

Papers from arXiv.org

Abstract: 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 parameters in terms of derivatives of the swap rate forward probability density function. We test the analytic result in the application to the interest rate futures option market.

Date: 2020-08, Revised 2021-02
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2008.09108

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