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

2023/06/26 by Alòs, E., Rolloos, F., Shiraya, K.
#91G20 #FOS: Economics and business #Mathematical Finance (q-fin.MF)

paper · doi:10.48550/arxiv.2306.14602

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.

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