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

Author

Listed:
  • Elisa Alòs
  • Frido Rolloos
  • Kenichiro Shiraya

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

Suggested Citation

  • Elisa Alòs & Frido Rolloos & Kenichiro Shiraya, 2023. "A lower bound for the volatility swap in the lognormal SABR model "Forthcoming in Axioms"," CARF F-Series CARF-F-564, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    • Handle: RePEc:cfi:fseres:cf564
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