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A lower bound for the volatility swap in the lognormal SABR model

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  • E. Al`os
  • F. Rolloos
  • K. 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.

Suggested Citation

  • E. Al`os & F. Rolloos & K. Shiraya, 2023. "A lower bound for the volatility swap in the lognormal SABR model," Papers 2306.14602, arXiv.org, revised Aug 2023.
    • Handle: RePEc:arx:papers:2306.14602
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    File URL: http://arxiv.org/pdf/2306.14602
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    References listed on IDEAS

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    1. Elisa Alòs & Kenichiro Shiraya, 2019. "Estimating the Hurst parameter from short term volatility swaps: a Malliavin calculus approach," Finance and Stochastics, Springer, vol. 23(2), pages 423-447, April.
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