Volatility Surface Reconstruction using Deep Learning under No-Arbitrage Constraints
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.
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