I'm trying to estimate the volatility surface of an especially illiquid options market; only ATM quotes are available (so Vanna-Volga approximation is not viable) for options on quarterly futures for the next year -- but I am working with ITM and OTM daily options that go on for the next seven years. So my questions are:
- How can I rescale my quarterly IV to a daily level -- especially given the seasonality of the power market?
- How can I create a volatility surface using just the ATM volatility and (presumably) the Greeks?
Your help is greatly appreciated!