Hi,
I am new to the SABR model, and I have read in a few articles that option prices (call options on forward rates) in the SABR model are given by the Black formula.
This seems like a rather surprising result, considering that SABR is a stochastic vol model. In the Wikipedia description, it states that "we force the SABR model price of the option into the form of the Black model valuation formula. "
So I am a little lost on what is happening here. Can someone explain to me what is going?
Many Thanks