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.

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