2021/05/11 by Fukasawa, Masaaki, Gatheral, Jim · 1 citation
#FOS: Economics and business #Mathematical Finance (q-fin.MF)
paper · doi:10.48550/arxiv.2105.05359
Following an approach originally suggested by Balland in the context of the SABR model, we derive an ODE that is satisfied by normalized volatility smiles for short maturities under a rough volatility extension of the SABR model that extends also the rough Bergomi model. We solve this ODE numerically and further present a very accurate approximation to the numerical solution that we dub the rough SABR formula.