# Questions tagged [volatility-interpolation]

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### Three questions regarding local volatility implementation (based on the Andreasen, Huge article "Volatility interpolation")

I am new to the area of local volatility interpolation and I am trying to make a decent implementation for calculating the local volatility surface from option prices using the basic methodology from ...
2k views

### Why use moneyness as an axis on a volatility surface

A simple volatility surface might have X axis = strike, Y axis = expiry and Z axis = implied volatility. But in many papers I see them use moneyness instead of strike. I have two questions. Why do ...
2k views

### Interpolation of FX Vol Surface from non-uniform strike vs tenor grid

TL;DR I'm trying to fit a vol surface to market FX options quotes in order to build a local vol model to price with. Unlike listed options that typically have a nice rectangular grid of strikes and ...
• 2,886
405 views

### FX smile extrapolation

Typically, 5 points data is available for smile construction : 25D RR, 25D SM, 10D RR, 10D SM and ATM. Questions: 1. How is a smooth smile curve generated with the help of these? 2. How is ...
• 517
1 vote
1k views

### Getting option volatility off vol surface

I am currently looking into FX options. I am given a delta-tenor vol surface and I want to get the volatility of an option given its strike and time to expiry. I am reading about the method used and ...
• 71
1 vote
915 views

### Reference: Vanna, volga, vega approximations

I am looking for a reference on how to approximate implied volatility in a stochastic model vis-a-vis vanna, volga, vega, and other model parameters, in particular the derivation of such equations and ...
• 21
1 vote
95 views

### How to interpolate volatility's skew using spline in Python

I have two lists to describe the function y(x) that represents strikes and the relative value of the skew of a volatility surface: ...
1 vote
284 views

### Volatility surface tenors

I don't think this has been asked before, but are the tenors on a volatility surface out of spot date for the currency pair or out of value T+0?
• 71
1 vote
81 views

### how to interpolate and extrapolate the local volatility surface?

Local volatility can be computed in terms of call prices using Dupire's formula. Assume we have a rectangle call price surface, let's say $I = [30,60]\times[1 day, 1year]$. For interpolation, should ...
• 160
1 vote
62 views

### Dividend adjustment on SABR formula for interpolating implied volatility

We are using a SABR model to interpolate the implied volatility surface. The model yields a formula for implied volatility that contains the following term: $\ln \left(\frac{K}{F}\right)$ It is ...
• 773
1 vote
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### FX Smile Curve Extrapolation [duplicate]

How a smooth smile curve is generated from 5 smile points : 10D RR, 25D RR, 10D SM, 25D SM and ATM? What are the commonly used extrapolation and interpolation techniques? I have seen people ...
• 517
1 vote
222 views

### spline Interpolation on volatility surface not smooth

I am testing spline interpolation for volatility surface with Matlab griddedInterpolant function with spline as interpolation and extrapolation method. Here is the original data I used to do ...
233 views

### Volatility surface interpolation for Black-Scholes delta hedging

A general question for interpolation method for implied volatility between tenors. I've recently stumbled accross a dataset from http://www.math.ku.dk/rolf/Svend/, and I would like to interpolate the ...
336 views

### Volatility time weights calculation

I. Clark introduces the concept of volatility time in Foreign Exchange Option Pricing under which the implied volatility should be interpolated in time with the formula below: where w is a weight ...
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I am currently working with a slice-wise SVI parametrisation of the implied volatility surface. $\sigma^2(x,t) = a_t + b_t (\rho_t (x - m_t) + \sqrt{(x - m_t)^2 + \theta^2})$ Does anyone have ...