No arbitrage global parametrization for the eSSVI volatility surface

A. Mingone

Quantitative Finance, 2022, vol. 22, issue 12, 2205-2217

Abstract: This article describes a global and arbitrage-free parametrization of the eSSVI implied volatility surfaces introduced by Hendriks and Martini [The extended SSVI volatility surface. J. Comput. Finance, 2019, 22, 25–39]. A calibration of such surfaces has already been proposed by the quantitative research team at Zeliade Systems [Cohort et al., Robust calibration and arbitrage-free interpolation of SSVI slices. Decisions Econ. Finance, 2019, 42, 665–677], but the calibration algorithm is sequential in expiries (one maturity is calibrated after the other), lacking a global view on the surface. The alternative calibration suggested in this article targets all maturities at once and always guarantees an arbitrage-free fit of market data.

Date: 2022
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DOI: 10.1080/14697688.2022.2117076

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