mafipy.calibrator.sabr_caibration_west

mafipy.calibrator.sabr_caibration_west(market_vols, market_strikes, option_maturity, beta, init_rho=0.1, init_nu=0.1)[source]

calibrates SABR parameters to market volatilities by algorithm in West, G. (2005). Calibration of the SABR Model in Illiquid Markets. Applied Mathematical Finance, 12(4), 371–385. https://doi.org/10.1080/13504860500148672

Parameters:
  • market_vols (array) – market volatilities. Middle of elements in the array must be atm volatility.
  • market_strikes (array) – market strikes corresponded to market_vol. Middle of elements in the array must be atm strike.
  • option_maturity (float) –
  • beta (float) – pre-determined beta.
  • init_rho (float) – initial guess of rho. Default value is meaningless value, 0.1.
  • init_nu (float) – initial guess of nu. Default value is meaningless value, 0.1.
Returns:

alpha, beta, rho, nu.
Return type:

four float value.
Raises:
  • AssertionError – if length of market_vols is not odd.
  • AssertionError – if length of market_vols and market_strikes are not same.