Say I want to compute a call price for a given set of SABR parameters.

I use Hagans approximation and compute $\sigma_B$. The rate is not zero. Should I then compute the option price using

Does it matter whether the asset is a forward or not?

  • $\begingroup$ I am 99% sure you have to use the first one. SABR IV is after all obtained by Black's formula. But I am actually not sure. $\endgroup$
    – Sanjay
    Jul 22, 2019 at 15:20


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