Preprint B93/2016
Backtesting SVI Parameterization of Implied Volatilities
Rafael Balestro Dias da Silva
Keywords: Financial Options | Financial Derivatives | Volatility Smile | Black-Scholes Formula | SVI | Stochastic Differential Equation | Variance Modelling.

Since the stock market crash in 1987, many generalizations of Black-Scholes model have been introduced, in order to incorporate the so-called volatility smile eect. In this master thesis we study the numerical aspects of the stochastic volatility inspired (SVI) parameterization of implied volatility smile. Introduced at the end of 1990's, this model - which is basically a parameterized functional form - presents a nice smile adherence, which made it popular within market practitioners mainly by its low computational cost. We present numerical experiments using real data, evaluating how reliable would the tted parameters be on calculating volatilities for future dates.