Heat kernel methods in finance: the SABR model

The SABR model is a stochastic volatility model not admitting a closed form solution. Hagan, Kumar, Leniewski and Woodward have obtained an approximate solution by means of perturbative techniques. A more precise approximation was found by Henry-Labordère with the heat kernel expansion method. The latter relies on deep and hard theorems from Riemannian geometry which are almost totally unknown to the professionals of finance, who however are those primarily interested in these results. The goa...