SABR model

Posted by Eduardo Alonso on Nov 11, 2010; 7:19am
URL: http://quantlib.414.s1.nabble.com/SABR-model-tp265.html

Dear all, I have a problem with the sabr model ( implementation in ql/termstructures/volatility/sabr.cpp). There is an approximation for close to at the money that I still don't know where it comes from. The multiplier is z/xx, but close to ATM there is what looks like a Taylor expansion but I couldn't figure out what is being expanded and about what point. Can someone tell me what's going on there? I am using Hagan's paper on SABR and I see nothing similar. If you can give me another reference where that approximation is to be found, or if you can tell me how to deduce it, I would appreciate.

Thanks a lot in advance and regards to everyone.

Eduardo

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