Building arbitrage-free implied volatility: Sinkhorn's algorithm and variants

Hadrien De March and Pierre Henry-Labordere
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Hadrien De March: ECOLE POLYTECHNIQUE, QANTEV
Pierre Henry-Labordere: SOCIETE GENERALE

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Abstract: We consider the classical problem of building an arbitrage-free implied volatility surface from bid-ask quotes. We design a fast numerical procedure, for which we prove the convergence, based on the Sinkhorn algorithm that has been recently used to solve efficiently (martingale) optimal transport problems.

Date: 2019-02, Revised 2023-07
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Citations: View citations in EconPapers (3)

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