Volatility parametrizations with random coefficients: analytic flexibility for implied volatility surfaces

DOI10.1137/24M1713107MaRDI QIDQ6853617zbMATH OpenFDO

Authors Nicola F. Zaugg, Lech A. Grzelak

Publication date 25 February 2026

Published in SIAM Journal on Financial Mathematics (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1137/24M1713107

zbMATH Keywords

implied volatility parametrizationsmarket-makingrandomizationshort-term optionsstochastic parametersW-shaped implied volatility

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Interest rates, asset pricing, etc. (stochastic models) (91G30)

Cites work

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• On randomization of affine diffusion processes with application to pricing of options on VIX and S\&P 500
• Robust calibration and arbitrage-free interpolation of SSVI slices
• The randomized Heston model
• The stochastic collocation Monte Carlo sampler: highly efficient sampling from ‘expensive’ distributions
• W-shaped implied volatility curves and the Gaussian mixture model

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