Mean-Reverting SABR Models: Closed-form Surfaces and Calibration for Equities
Abstract
In this paper, we consider three stochastic-volatility models, each characterized by distinct dynamics of instantaneous volatility: (1) a CIR process for squared volatility (i.e., the classical Heston model); (2) a mean-reverting lognormal process for volatility; and (3) a CIR process for volatility. Previous research has provided semi-analytical approximations for these models in the form of simple (non-meanreverting) SABR models, each suitably parameterized for a given expiry.
Fields of Study & Subjects
Stochastic processes and financial applications
Financial Risk and Volatility Modeling
Financial Markets and Investment Strategies
Publication details
- Journal / source
- Wilmott
- Volume
- 2026
- Issue
- 142
- Publication date
- 10 February 2026
- Language
- EN