Continuous Dividends Conditions Based On The Formula And Svi Function In Dupire Local Volatility Surface Calibration

Knowing prices of standard European options, we consider the underlying asset with con-tinuous dividends and adjusted prices of its European options, and discuss how to calibrate the local volatility surface. Starting from the SVI function, we first deduce the approximating implied volatility surface function with three methods. Then we calibrate the local volatility surface with the expression function of local volatility which is derived from Dupire's formula. Finally we verify the effectiveness of these three methods in a numerical example.