MIXING THE SABR FOR NEGATIVE RATES: ANALYTICAL ARBITRAGE-FREE SOLUTION
Presenter: Alexander Antonov: Senior Vice President, Quantitative Research, Numerix.
- Negative rates for the SABR model: beyond the simple shift
- Free Boundary SABR
Exact analytical solution for zero correlation and accurate approximation for the general correlation
Exact analytical solution for general correlation
Mixing zero correlation Free SABR with the normal Free one; arbitrage free analytical solution via 1D integral
- Numerical results and conclusion
Joint calibration to swaptions and CMS’s; comparison of the Shifted, Free and Mixture SABR: the clear winner is the mixture SABR
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