TY - JOUR T1 - Volatility Surface Calibration to Illiquid Options JF - The Journal of Derivatives SP - 87 LP - 96 DO - 10.3905/jod.2019.26.3.087 VL - 26 IS - 3 AU - László Nagy AU - Mihály Ormos Y1 - 2019/02/28 UR - https://pm-research.com/content/26/3/87.abstract N2 - This article shows the fragility of the widely-used Stochastic Volatility Inspired (SVI) methodology in option pricing. The results highlight the sensitivity of SVI to the fitting penalty function. The authors compare different weight functions and propose to use the implied vega weights. They then unveil the relationship between vega weights and the minimization task of observed and fitted price differences, and show that implied vega weights can stabilize the SVI fit to illiquid options.TOPICS: Options, statistical methods, performance measurement ER -