Feeling the generalised rough SABR boundary

Battle Count: 50

Highly relevant for quantitative researchers and traders dealing with exotic options or interest rate derivatives where the SABR model is standard. Understanding the boundary behavior (absorption at zero) is critical for accurate pricing of deep out-of-the-money options and managing tail risk, especially in the context of rough volatility which has become standard in recent years.

The paper presents theoretical results. Implementing the model itself is complex due to the non-Markovian nature of rough volatility (requiring Volterra processes or fractional Brownian motion approximations). The specific asymptotic formulas derived here are analytical and do not require numerical implementation for the theory itself, but applying them in a trading system would require significant engineering effort.

The paper is purely theoretical. All mathematical derivations, assumptions, and proofs are fully described within the text. No external data or code is required to verify the theoretical results, but no simulation code is provided.