Nimbus3000 wrote:Alan wrote:Some possible issues beyond simply out-of-sync or bad market data:
1. Since this is a single-name stock, what is the exercise style and how are you converting to Euro-style if it is American-style?
2. Are you using exclusively out-of-the-money options to calculate IV's? (I would, so puts for K < S0, calls for K > S0).
3. Assuming Euro-style or a reasonable conversion to that exercise style, are you then enforcing put-call parity and, if so, how? The CBOE has a method in the "VIX white paper", which will yield an option implied forward price. I would calculate that and compare to the futures price. (BTW, from where are you getting that futures price?) If they are different, try re-running the whole analysis with that option-implied forward price (new IV's, new SVI run, etc).
1. These are european options
2. Yes, I'm using OTMs exclusively
3. Although I havent enforced put call parity conditions, I checked and PCP holds for the prices above if i include transaction costs and spreads
As far as the data is concerned, these data points are in sync and have been taken from a TBT feed
Well, it sounds like you have proceeded carefully. Since the SVI fit is certainly not guaranteed to lie between the market bid-ask, it seems like you were right in your observation that it's just poor performance. The Fengler method fit is likely much better, and fomisha just posted another one to check out.