Parametric modeling of implied smile functions: a generalized SVI model. (English) Zbl 1269.91101
Summary: In this paper, we propose a parametric model of implied variance which is a natural generalization of the SVI model. The model improves the SVI by allowing more flexibly the negative curvature in the tails which is justified both theoretically and empirically. The fitting of the model, comparing with the other competing parametric models (SVI, SABR), to the implied volatility smile and the risk neutral density function is tested on SPX options.
MSC:
| 91G70 | Statistical methods; risk measures |
| 62P05 | Applications of statistics to actuarial sciences and financial mathematics |
| 91G20 | Derivative securities (option pricing, hedging, etc.) |
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