Our flexible market fitter extracts the cleanest, most unbiased view of the option market.
Given an interest-rate curve, our fitter determines the optimal borrow rate for each option expiration to align call and put implied volatilities. This produces a coherent and market-consistent borrow curve.
When no interest-rate curve is supplied, our fitter jointly searches for the best interest and borrow rates for each expiration, ensuring call and put implied volatilities align across all strikes. This can be applied to multiple non-dividend-paying underlyings to estimate the average implied interest rate used by the market. In practice, the market-implied rates often differ from SOFR rates, which many trading desks use by default.
Once interest and borrow rates are set, our fitter applies an optimal volatility model to fit each expiration’s smile, while checking for vertical and butterfly arbitrage. The result is a clean, arbitrage-free implied volatility surface.