New answers tagged interpolation
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Interpolating option surface while respecting no-arbitrage conditions
I am interested in the same topic.
Often you have some kind of stochastic model which you calibrate to fit the option data as closely as possible and then calculate the implied volatility surface ...
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Interpolating option surface while respecting no-arbitrage conditions
Once you normalise properly to remove drift effects and dividends, you will need a convex-decreasing in space and increasing in time interpolation.
(basically do in moneyness (to fwd) and not absolute ...
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