Journal of Energy Markets

A construction of volatility surfaces for futures markets

Qimou Su, Ni Xiao and Curt Randall


This paper reports a practical approach to constructing arbitrage-free volatility surfaces that are consistent with the observed options smiles and Samuelson effect in futures markets.A separate volatility surface is created for each futures contract. The algorithm is fast, robust and able to match the entire market-implied volatility surface within a couple of basis points. The local volatility and marginal distribution surfaces for the futures price are also provided.We use data from NewYork Mercantile Exchange West Texas Intermediate (NYMEX WTI) oil to demonstrate the algorithm.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to View our subscription options

You need to sign in to use this feature. If you don’t have a account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here