Generalised Arbitrage-Free SVI Volatility Surfaces

20 Pages Posted: 27 Oct 2012 Last revised: 28 May 2016

See all articles by Gaoyue Guo

Gaoyue Guo

Ecole Polytechnique, Paris

Antoine (Jack) Jacquier

Imperial College London; The Alan Turing Institute

Claude Martini

Zeliade Systems

Leo Neufcourt

Columbia University

Date Written: October 26, 2012

Abstract

In this article we propose a generalisation of the recent work of Gatheral-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.

Keywords: SVI volatility surface, calendar spread arbitrage, butterfly arbitrage, static arbitrage

JEL Classification: G12, C63

Suggested Citation

Guo, Gaoyue and Jacquier, Antoine and Martini, Claude and Neufcourt, Leo, Generalised Arbitrage-Free SVI Volatility Surfaces (October 26, 2012). Available at SSRN: https://ssrn.com/abstract=2167263 or http://dx.doi.org/10.2139/ssrn.2167263

Gaoyue Guo

Ecole Polytechnique, Paris ( email )

1 rue Descartes
Paris, 75005
France

Antoine Jacquier (Contact Author)

Imperial College London ( email )

South Kensington Campus
London SW7 2AZ, SW7 2AZ
United Kingdom

HOME PAGE: http://wwwf.imperial.ac.uk/~ajacquie/

The Alan Turing Institute ( email )

British Library, 96 Euston Road
London, NW12DB
United Kingdom

Claude Martini

Zeliade Systems ( email )

Paris
France

HOME PAGE: http://www.zeliade.com

Leo Neufcourt

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

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