DOI: 10.3390/axioms12080749 ISSN: 2075-1680
A Lower Bound for the Volatility Swap in the Lognormal SABR Model
Elisa Alòs, Frido Rolloos, Kenichiro Shiraya- Geometry and Topology
- Logic
- Mathematical Physics
- Algebra and Number Theory
- Analysis
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.