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Generalised arbitrage-free SVI volatility surfaces

Author

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

Abstract

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.

Suggested Citation

  • Gaoyue Guo & Antoine Jacquier & Claude Martini & Leo Neufcourt, 2012. "Generalised arbitrage-free SVI volatility surfaces," Papers 1210.7111, arXiv.org, revised May 2016.
  • Handle: RePEc:arx:papers:1210.7111
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    File URL: http://arxiv.org/pdf/1210.7111
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    References listed on IDEAS

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    1. Matthias Fengler, 2009. "Arbitrage-free smoothing of the implied volatility surface," Quantitative Finance, Taylor & Francis Journals, vol. 9(4), pages 417-428.
    2. David Hobson, 2010. "Comparison results for stochastic volatility models via coupling," Finance and Stochastics, Springer, vol. 14(1), pages 129-152, January.
    3. Jim Gatheral & Antoine Jacquier, 2014. "Arbitrage-free SVI volatility surfaces," Quantitative Finance, Taylor & Francis Journals, vol. 14(1), pages 59-71, January.
    4. S. Benaim & P. Friz, 2009. "Regular Variation And Smile Asymptotics," Mathematical Finance, Wiley Blackwell, vol. 19(1), pages 1-12.
    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. 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.
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    Cited by:

    1. Sylvain Corlay, 2013. "B-spline techniques for volatility modeling," Papers 1306.0995, arXiv.org, revised Jun 2015.

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