The aim of this technical document is threefold with the bigger picture being to contribute, within the challenging regulatory environment, to bring closer together traditional conflicting practices such as trading vs risk as well as risk responsiveness vs stability. In order to achieve this...

The aim of this article is to address the methodology behind de-arbitraging a realistic volatility surface and stressing it without adding arbitrages. We derive from basic principles the constraints which the changes on the strike and the tenor axis must satisfy in order to make a volatility...