Robust calibration and arbitrage-free interpolation of SSVI slices

Abstract: We describe a robust calibration algorithm of a set of SSVI slices (i.e. a set of 3 SSVI parameters $\theta, \rho, \varphi$ attached to each option maturity available on the market), which grants that these slices are free of Butterfly and Calendar-Spread arbitrage. Given such a set of consistent SSVI parameters, we show that the most natural interpolation/extrapolation of the parameters provides a full continuous volatility surface free of arbitrage. The numerical implementation is straightforward, robust and quick, yielding an effective, parsimonious solution to the smile problem, which has the potential to become a benchmark one.