A lower bound for the volatility swap in the lognormal SABR model "Forthcoming in Axioms"

Elisa Alòs, Frido Rolloos and Kenichiro Shiraya

No CARF-F-564, CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo

Abstract: 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 parameter and is a sharper lower bound than the at-the-money implied volatility for correlation less than or equal to zero. This paper is available at https://arxiv.org/abs/2306.14602

Date: 2023-06
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Persistent link: https://EconPapers.repec.org/RePEc:cfi:fseres:cf564

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