Convex volatility interpolation
The modelling of implied volatility surfaces is reframed as an optimisation problem
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Fast, accurate and arbitrage-free volatility surface fitting remains a core challenge for options desks. Fabrice Deschâtres presents convex volatility interpolation (CVI), a framework that casts the problem as quadratic programming in variance space, with intuitive parameters, bid-ask-aware penalties and rigorous treatment of the tails. CVI calibrates volatility
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