Arbitrage-free SVI volatility surfaces

In this article, we show how to calibrate the widely used SVI parameterization of the implied volatility smile 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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Year of publication:	2014
Authors:	Gatheral, Jim ; Jacquier, Antoine
Published in:	Quantitative Finance. - Taylor & Francis Journals, ISSN 1469-7688. - Vol. 14.2014, 1, p. 59-71
Publisher:	Taylor & Francis Journals

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Extent:	text/html
Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010751542