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I currently still use a segmented curve where I basically build two custom made equations. It is absolutely rudimentary. [1] Vol(K) = Vol(ATM) * (F/K)^(1-callskew) for moneyness > 1, with moneyeness = F/K [2] Vol(K) = Vol(ATM) * (K/F)^(1-putskew) for moneyness <= 1, with moneyness = F/K I...

Thank you very much for these replies. This is basically exactly what I was looking for. I read about most of those models, but given the very theoretical papers, I sometimes struggle to convert this into python code or excel. These approaches look promising. I’ll try it out.

I am looking for a very simple equation to parametrise a curve. The equation should only be dependant on the strike price K, the underlying price F, the at the money volatility Sigma and some other values for calibration. The equation should be able to produce results like in the chart below:

Thanks for the input so far. Both methodologies are interesting. I read about both versions before as well. However, it seems that both try to tackle the volatility surface by building a curve out of given volatilities. Which is good, if the underlying is liquid enough. But my underlying...

Hi, I am currently to create my own volatility smile for currency options. I am basically reading the bids and offers and calculating the implied volatilities. I now want to shape and parametrise my own volatility smile. What is a good way to do it? I tried it by trial-and-error, which did...