SVI vs 5th-order spline for four kinds of options (IMAGE)

Shanghai Jiao Tong University Journal Center

SVI vs 5th-order spline for four kinds of options

Caption

We can see the difference between SVI and spline more clearly here. As expected, SVI curves show nice “smiles.” On the other hand, the spline follows the datapoints more closely but can go only as far as the observed data. In all four graphs for the four kinds of options, spline does fit the market implied volatilities better. In accordance with previous discussions, SVI fits the observed implied volatilities rather poorly for CSI300 index options.

Credit

Yuhan Jiao (Tianjin University of Finance and Economics, China) Shuxin Guo (Southwest Jiaotong University, China) Qiang Liu(Southwestern University of Finance and Economics, China)

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