Arbitrage-free SVI volatility surfaces
In this article, we show how to calibrate the widely-used SVI parameterization of the implied volatility surface in such a way as to guarantee the absence of static arbitrage. In particular, we exhibit a large class of arbitrage-free SVI volatility surfaces with a simple closed-form representation. We demonstrate the high quality of typical SVI fits with a numerical example using recent SPX options data.
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- Jim Gatheral & Antoine Jacquier, 2010.
"Convergence of Heston to SVI,"
- Matthias R. Fengler, 2005.
"Arbitrage-Free Smoothing of the Implied Volatility Surface,"
SFB 649 Discussion Papers
SFB649DP2005-019, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
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