Assa, Hirbod; Pouralizadeh, Mostafa; Badamchizadeh, … - In: Risks : open access journal 7 (2019) 2/45, pp. 1-18
arbitrage. Then, we propose a simple quadratic model to parameterize implied volatility and remove the static arbitrage. The … effects of both butterfly and calendar spread arbitrage make the implied volatility surface free of static arbitrage. …, we discuss that by imposing the no-moral-hazard risk, the removal of arbitrage is equivalent to removing the static …