SABR Smiles for RFR Caplets

16 Pages Posted: 14 Apr 2020 Last revised: 6 May 2020

See all articles by Sander Willems

Sander Willems

affiliation not provided to SSRN

Date Written: April 3, 2020


We present a natural extension of the SABR model to price both backward and forward-looking RFR caplets in a post-Libor world. Forward-looking RFR caplets can be priced using the market standard approximations of Hagan et al. (2002). We provide closed-form effective SABR parameters for pricing backward-looking RFR caplets. These results are useful for smile interpolation and for analyzing backward and forward-looking smiles in normalized units.

Keywords: RFR, IBOR Replacement, Interest Rate Cap Floor, SABR

Suggested Citation

Willems, Sander, SABR Smiles for RFR Caplets (April 3, 2020). Available at SSRN: or

Sander Willems (Contact Author)

affiliation not provided to SSRN

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