Calibration of the SABR Model in Illiquid Markets
AbstractRecently the SABR model has been developed to manage the option smile which is observed in derivatives markets. Typically, calibration of such models is straightforward as there is adequate data available for robust extraction of the parameters required asinputs to the model. The paper considers calibration of the model in situations where input data is very sparse. Although this will require some creative decision making, the algorithms developed here are remarkably robust and can be used confidently for mark to market and hedging of option portfolios.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Mathematical Finance.
Volume (Year): 12 (2005)
Issue (Month): 4 ()
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- Qasim Nasar-Ullah, 2013. "A parallel implementation of a derivative pricing model incorporating SABR calibration and probability lookup tables," Papers 1301.3118, arXiv.org.
- Kenichiro Shiraya & Akihiko Takahashi, 2009. "Pricing Average Options on Commodities," CARF F-Series CARF-F-177, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo, revised Feb 2012.
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