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arXiv · 2112.14310

Rough multifactor volatility for SPX and VIX options

Antoine Jacquier·Aitor Muguruza·Alexandre Pannier
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Abstract

We provide explicit small-time formulae for the at-the-money implied volatility, skew and curvature in a large class of models, including rough volatility models and their multi-factor versions. Our general setup encompasses both European options on a stock and VIX options, thereby providing new insights on their joint calibration. The tools used are essentially based on Malliavin calculus for Gaussian processes. We develop a detailed theoretical and numerical analysis of the two-factor rough Bergomi model and provide insights on the interplay between the different parameters for joint SPX-VIX smile calibration.

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Antoine Jacquier, Aitor Muguruza, Alexandre Pannier. 2021-12-28. Rough multifactor volatility for SPX and VIX options. https://arxiv.org/abs/2112.14310

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