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The extended SSVI volatility surface

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  • Sebas Hendriks
  • Claude Martini

Abstract

We extend Gatheral and Jacquier’s ;surface stochastic ;volatility-inspired (SSVI) parameterization by making the correlation maturity ;dependent and obtaining the necessary and sufficient conditions for no calendar-spread arbitrage. The parametric families for the correlation for which those conditions are explicit are also provided. This extension of the SSVI formula typically increases the calibration accuracy for short maturities and may also be more robust in stressed market conditions.

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Handle: RePEc:rsk:journ0:6555351
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