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I have referred to the some of the well known papers but none of them has a clear answer for my question. I know that both of these models have some disadvantages but, what is the industry standard for pricing derivatives? I need this information for pricing CVA.

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You may find this text helpful: Modern SABR Analytics : Formulas and Insights for Quants, Former Physicists and Mathematicians by Alexandre Antonov, Michael Konikov, Michael Spector.

Focusing on recent advances in option pricing under the SABR model, this book shows how to price options under this model in an arbitrage-free, theoretically consistent manner. It extends SABR to a negative rates environment, and shows how to generalize it to a similar model with additional degrees of freedom, allowing simultaneous model calibration to swaptions and CMSs.

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  • $\begingroup$ Thank you for the reference. So, I assume SABR model is used the most to price swaptions in the industry? I thought it might be shifted log normal or normal model for the Black-76 model is widely adopted to price interest rate derivatives. $\endgroup$ – Urja May 22 '20 at 20:47

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