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Explicit SABR Calibration Through Simple Expansions

21 Pages Posted: 18 Jul 2014  

Fabien Le Floc'h

Calypso Technology; Independent

Gary J. Kennedy

Clarus Financial Technology

Date Written: July 16, 2014

Abstract

The SABR stochastic volatility model is a very popular interpolator of implied volatilities, with a given dynamic. This paper presents a simple and very fast method to calibrate the SABR model to given market volatilities, that is to imply the SABR parameters from a given market smile.

Keywords: stochastic volatility, SABR, calibration, implied volatility, finance

Suggested Citation

Le Floc'h, Fabien and Kennedy, Gary J., Explicit SABR Calibration Through Simple Expansions (July 16, 2014). Available at SSRN: https://ssrn.com/abstract=2467231 or http://dx.doi.org/10.2139/ssrn.2467231

Fabien Le Floc'h (Contact Author)

Calypso Technology ( email )

106 rue de la Boetie
Paris, 75008
France

Independent ( email )

France

Gary J. Kennedy

Clarus Financial Technology ( email )

8 Monkwell Square
London, EC2Y 5BN
United Kingdom

HOME PAGE: http://www.clarusft.com

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