• Medientyp: E-Artikel
  • Titel: Probability density of lognormal fractional SABR model
  • Beteiligte: Akahori, Jiro [Verfasser:in]; Song, Xiaoming [Verfasser:in]; Wang, Tai-Ho [Verfasser:in]
  • Erschienen: 2022
  • Erschienen in: Risks ; 10(2022), 8 vom: Aug., Artikel-ID 156, Seite 1-27
  • Sprache: Englisch
  • DOI: 10.3390/risks10080156
  • Identifikator:
  • Schlagwörter: asymptotic expansion ; lognormal fractional SABR model ; mixed fractional Brownian motion ; Malliavin calculus ; bridge representation ; Aufsatz in Zeitschrift
  • Entstehung:
  • Anmerkungen:
  • Beschreibung: Instantaneous volatility of logarithmic return in the lognormal fractional SABR model is driven by the exponentiation of a correlated fractional Brownian motion. Due to the mixed nature of driving Brownian and fractional Brownian motions, probability density for such a model is less studied in the literature. We show in this paper a bridge representation for the joint density of the lognormal fractional SABR model in a Fourier space. Evaluating the bridge representation along a properly chosen deterministic path yields a small time asymptotic expansion to the leading order for the probability density of the fractional SABR model. A direct generalization of the representation of joint density often leads to a heuristic derivation of the large deviations principle for joint density in a small time. Approximation of implied volatility is readily obtained by applying the Laplace asymptotic formula to the call or put prices and comparing coefficients.
  • Zugangsstatus: Freier Zugang
  • Rechte-/Nutzungshinweise: Namensnennung (CC BY)