Robust calibration and arbitrage-free interpolation of SSVI slices

Autor:	Cohort, Pierre, Corbetta, Jacopo, Martini, Claude, Laachir, Ismail
Rok vydání:	2018
Předmět:	Quantitative Finance - Computational Finance Quantitative Finance - Mathematical Finance Quantitative Finance - Pricing of Securities 91G60
Druh dokumentu:	Working Paper
Popis:	We describe a robust calibration algorithm of a set of SSVI slices (i.e. a set of 3 SSVI parameters $\theta, \rho, \varphi$ attached to each option maturity available on the market), which grants that these slices are free of Butterfly and Calendar-Spread arbitrage. Given such a set of consistent SSVI parameters, we show that the most natural interpolation/extrapolation of the parameters provides a full continuous volatility surface free of arbitrage. The numerical implementation is straightforward, robust and quick, yielding an effective, parsimonious solution to the smile problem, which has the potential to become a benchmark one. Comment: 9 pages, 3 figures
Databáze:	arXiv
Externí odkaz:	http://arxiv.org/abs/1804.04924 Zobrazit plný text záznamu View this record from Arxiv