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Generalised arbitrage-free SVI volatility surfaces

  • Gaoyue Guo
  • Antoine Jacquier
  • Claude Martini
  • Leo Neufcourt

In this article we propose a generalisation of the recent work of Gatheral and Jacquier on explicit arbitrage-free parameterisations of implied volatility surfaces. We also discuss extensively the notion of arbitrage freeness and Roger Lee's moment formula using the recent analysis by Roper. We further exhibit an arbitrage-free volatility surface different from Gatheral's SVI parameterisation.

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File URL: http://arxiv.org/pdf/1210.7111
File Function: Latest version
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Paper provided by arXiv.org in its series Papers with number 1210.7111.

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Date of creation: Oct 2012
Date of revision: Oct 2013
Handle: RePEc:arx:papers:1210.7111
Contact details of provider: Web page: http://arxiv.org/

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  1. David Hobson, 2010. "Comparison results for stochastic volatility models via coupling," Finance and Stochastics, Springer, vol. 14(1), pages 129-152, January.
  2. Jim Gatheral & Antoine Jacquier, 2012. "Arbitrage-free SVI volatility surfaces," Papers 1204.0646, arXiv.org, revised Mar 2013.
  3. Antoine Jacquier & Martin Keller-Ressel & Aleksandar Mijatovic, 2011. "Large deviations and stochastic volatility with jumps: asymptotic implied volatility for affine models," Papers 1108.3998, arXiv.org.
  4. Matthias Fengler, 2009. "Arbitrage-free smoothing of the implied volatility surface," Quantitative Finance, Taylor & Francis Journals, vol. 9(4), pages 417-428.
  5. L. Rogers & M. Tehranchi, 2010. "Can the implied volatility surface move by parallel shifts?," Finance and Stochastics, Springer, vol. 14(2), pages 235-248, April.
  6. S. Benaim & P. Friz, 2009. "Regular Variation And Smile Asymptotics," Mathematical Finance, Wiley Blackwell, vol. 19(1), pages 1-12.
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