English

Volatility Surface Reconstruction using Deep Learning under No-Arbitrage Constraints

Computational Finance 2026-05-26 v1 Machine Learning

Abstract

We study the reconstruction of implied volatility surfaces from sparse and noisy option quotes using deep learning models under no-arbitrage constraints. We compare multiple neural architectures, including multilayer perceptrons, convolutional networks, U-Nets, variational autoencoders, and Transformer-based models against classical SVI parameterizations on option market data. Results show that Transformer and U-Net architectures achieve strong reconstruction accuracy, particularly under sparse observation regimes, while soft arbitrage penalties significantly reduce arbitrage violations with moderate impact on reconstruction error. We further analyze the trade-off between accuracy and arbitrage consistency across architectures and regularization strengths.

Keywords

Cite

@article{arxiv.2605.24031,
  title  = {Volatility Surface Reconstruction using Deep Learning under No-Arbitrage Constraints},
  author = {Pablo Rodriguez Manzi},
  journal= {arXiv preprint arXiv:2605.24031},
  year   = {2026}
}

Comments

MSc thesis, Universidad de Buenos Aires, 2026. 94 pages, 27 figures