Generalized Arbitrage-Free SVI Volatility Surfaces

Gaoyue Guo (), Antoine Jacquier, Claude Martini and Leo Neufcourt
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Gaoyue Guo: MICS - Mathématiques et Informatique pour la Complexité et les Systèmes - CentraleSupélec - Université Paris-Saclay, Fédération de Mathématiques de CentraleSupélec - CentraleSupélec - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique
Antoine Jacquier: Imperial College London
Claude Martini: MATHFI - Financial mathematics - Inria Paris-Rocquencourt - Inria - Institut National de Recherche en Informatique et en Automatique - ENPC - École nationale des ponts et chaussées - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12
Leo Neufcourt: Columbia University [New York]

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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.

Date: 2016
Note: View the original document on HAL open archive server: https://hal.science/hal-05564337v1
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Published in SIAM Journal on Financial Mathematics, 2016, 7 (1), pp.619-641. ⟨10.1137/120900320⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05564337

DOI: 10.1137/120900320

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