Building arbitrage-free implied volatility: Sinkhorn's algorithm and variants
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.
Code (0)
등록된 구현이 없습니다.
Similar Papers 제목 키워드 기반
On asymptotically arbitrage-free approximations of the implied volatility
Following-up Fukasawa and Gatheral (Frontiers of Mathematical Finance, 2022), we prove that the BBF formula, the SABR formula, and the rough SABR formula provide asymptotically arbitrage-free approximations of the implie…
Generalised arbitrage-free SVI volatility surfaces
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 fre…
A Two-Step Framework for Arbitrage-Free Prediction of the Implied Volatility Surface
We propose a two-step framework for predicting the implied volatility surface over time without static arbitrage. In the first step, we select features to represent the surface and predict them over time. In the second s…
Time SeriesTime Series AnalysisShallow Representation of Option Implied Information
Option prices encode the market's collective outlook through implied density and implied volatility. An explicit link between implied density and implied volatility translates the risk-neutrality of the former into condi…
Dynamics of symmetric SSVI smiles and implied volatility bubbles
We develop a dynamic version of the SSVI parameterisation for the total implied variance, ensuring that European vanilla option prices are martingales, hence preventing the occurrence of arbitrage, both static and dynami…