Dirichlet Forms and Finite Element Methods for the SABR Model
Dirichlet Forms and Finite Element Methods for the SABR Model
We propose a deterministic numerical method for pricing vanilla options under the SABR stochastic volatility model, based on a finite element discretization of the Kolmogorov pricing equations via nonsymmetric Dirichlet forms. Our pricing method is valid both in moderate interest rate environments and in low interest rate regimes, such as …