Capturing smile dynamics with the quintic volatility model: SPX, SSR and VIX
A new model captures the term structure of SPX & VIX implied volatilities, ATM skew, and the skew-stickiness ratio
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Eduardo Abi Jaber and Shaun (Xiaoyuan) Li introduce the two-factor quintic Ornstein–Uhlenbeck (OU) model, where volatility is modelled as a degree-five polynomial of the sum of two Ornstein–Uhlenbeck processes driven by the same Brownian motion, each mean reverting at a different speed. They demonstrate that the model effectively captures the volatility surfaces of
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