The free boundary SABR: natural extension to negative rates

Antonov, Konikov and Spector adapt the popular SABR model to a negative rates environment

falling rates

The authors present a natural generalisation of the SABR model to negative rates and we describe its properties. They derive an exact formula for the option price in the zero-correlation case and an efficient approximation for general correlation written in terms of a one-dimensional integral of elementary functions.


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