SABR model ?

SmileVolTrade · June 26th, 2006, 1:42 pm

Hello gys,I' am trying to mplement the SABR model for the equity derivatives. But I wonder if at the moment the traders use this model in the bankaccording to your experience ? I have (beginner intuition...) that this model is not more stronger then black scholes model. Finding the good parameters of the model for index is very complex and these parameters depend on the level of underlying according to my result.Thank you

sheppardr · July 14th, 2006, 5:49 am

See if you can get:"Calibration of the SABR Model in Illiquid Markets. Graeme West. Applied Mathematical Finance, Vol. 12, No. 4, 371-385, December 2005."Hope the article helps.Roelof

mwc227 · July 30th, 2006, 1:45 pm

So in practice, traders first choose the 'beta' parameter, and this is more stable than other three parameters required for your calibration. 'beta' is important as it decides the backbone of vol-surface dynamics. If you have a wrong beta, then even when you have a very good quality calibration, your model will fail to return a reasonable risk greeks.To simply put, your hedging is wrong which will cost you 'money'!

jfuqua · July 30th, 2006, 6:18 pm

Free copy of that paper by Graeme West at Cambridge U.http://www.cam.wits.ac.za/mfinance/MIF2 ... Graeme.pdf

Cuchulainn · July 31st, 2006, 6:28 am

QuoteOriginally posted by: jfuquaFree copy of that paper by Graeme West at Cambridge U.http://www.cam.wits.ac.za/mfinance/MIF2 ... raeme.pdfI thought Dr. West was in South Africa?

cosmologist · August 2nd, 2006, 8:44 am

QuoteOriginally posted by: CuchulainnQuoteOriginally posted by: jfuquaFree copy of that paper by Graeme West at Cambridge U.http://www.cam.wits.ac.za/mfinance/MIF2 ... raeme.pdfI thought Dr. West was in South Africa?True true.

cosmologist · August 2nd, 2006, 8:45 am

QuoteOriginally posted by: CuchulainnQuoteOriginally posted by: jfuquaFree copy of that paper by Graeme West at Cambridge U.http://www.cam.wits.ac.za/mfinance/MIF2 ... raeme.pdfI thought Dr. West was in South Africa?True true.

troielee · June 24th, 2009, 9:10 am

It;s hard to understand the Author's formulas deducing...