Fixed-point iterative algorithm for SVI model

Abstract

The stochastic volatility inspired (SVI) model is widely used to fit the implied variance smile. Presently, most optimizer algorithms for the SVI model have a strong dependence on the input starting point. In this study, we develop an efficient iterative algorithm for the SVI model based on a fixed-point and least-square optimizer. Furthermore, we present the convergence results in certain situations for this novel iterative algorithm. Compared with the quasi-explicit SVI method, we demonstrate the advantages of the fixed-point iterative algorithm using simulation and market data.

Tasks

Reproductions