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SABR Question

Why does the market take the $\beta$ parameter as a "constant"?

  • I see most brokers quoting SABR parameters nowadays.
  • I've seen many banks use $\beta$=0.5 as a rule.
  • I've seen quants select a $\beta$ based on best fit to calibration instruments.

What is most correct to the spirit of the paper, and explain any issues to anticipate with IMR/IPV processes.

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