Arbitrage-free conditions for implied volatility surface by Delta

doi:10.1016/j.najef.2018.08.011

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	Arbitrage-free conditions for implied volatility surface by Delta
	Wang, Ximei 1,2; Zhao, Yanlong1,2 ; Bao, Ying 3
	2019-04-01
发表期刊	NORTH AMERICAN JOURNAL OF ECONOMICS AND FINANCE
ISSN	1062-9408
卷号	48 页码:819-834
摘要	Implied volatility surface provided by Deltas and maturities (IVS-DM) is widely used in financial fields, especially in foreign exchange options market, since it can effectively describe the characteristics of the volatilities. The main purpose of this paper is to develop arbitrage-free conditions for the IVS-DM. We propose sufficient conditions for the IVS-DM to be static arbitrage-free, which are proved to be necessary under a mild assumption. To test the arbitrage opportunities in the market data, we build a practical tool, which is more accurate than existing ones such as early warning indicator tests. For illustration, arbitrage tests are conducted on a simulated IVS-DM to show the effectiveness of the conditions. The results are consistent with the tests for the implied volatility surface provided by strikes and maturities. Furthermore, empirical examinations are implemented on EURUSD and USDJPY currency options to ensure the feasibility of the proposed conditions.
关键词	Implied volatility surface Foreign exchange market Arbitrage-free condition Deltas
DOI	10.1016/j.najef.2018.08.011
语种	英语
资助项目	National Key Research and Development Program of China[2016YFB0901902] ; National Natural Science Foundation of China[61622309] ; National Key Basic Research Program of China (973 Program)[2014CB845301]
WOS研究方向	Business & Economics
WOS类目	Business, Finance ; Economics
WOS记录号	WOS:000465646200052
出版者	ELSEVIER SCIENCE INC
引用统计
文献类型	期刊论文
条目标识符	http://ir.amss.ac.cn/handle/2S8OKBNM/34615
专题	系统科学研究所
通讯作者	Zhao, Yanlong
作者单位	1.Chinese Acad Sci, Acad Math & Syst Sci, LSC, Beijing 100190, Peoples R China 2.Univ Chinese Acad Sci, Sch Math Sci, Beijing 100049, Peoples R China 3.Ind & Commercial Bank China, Risk Management Dept, Beijing 100033, Peoples R China
推荐引用方式 GB/T 7714	Wang, Ximei,Zhao, Yanlong,Bao, Ying. Arbitrage-free conditions for implied volatility surface by Delta[J]. NORTH AMERICAN JOURNAL OF ECONOMICS AND FINANCE,2019,48:819-834.
APA	Wang, Ximei,Zhao, Yanlong,&Bao, Ying.(2019).Arbitrage-free conditions for implied volatility surface by Delta.NORTH AMERICAN JOURNAL OF ECONOMICS AND FINANCE,48,819-834.
MLA	Wang, Ximei,et al."Arbitrage-free conditions for implied volatility surface by Delta".NORTH AMERICAN JOURNAL OF ECONOMICS AND FINANCE 48(2019):819-834.