Target volatility option pricing in the lognormal fractional SABR model
研究了对数正态分数阶SABR模型下目标波动率期权的定价，通过伊藤微积分和Malliavin导数推导出近似公式，并给出小波动率展开的闭式解，数值实验验证了近似精度。
We examine in this article the pricing of target volatility options in the lognormal fractional SABR model. A decomposition formula of Itô's calculus yields an approximation formula for the price of a target volatility option in small time by the technique of freezing the coefficient. A decomposition formula in terms of Malliavin derivatives is also provided. Alternatively, we also derive closed form expressions for a small volatility of volatility expansion of the price of a target volatility option. Numerical experiments show the accuracy of the approximations over a reasonably wide range of parameters.