# Beyond the Smile: A Hybrid Convolutional VAE for Crypto Volatility Surfaces

arXiv: https://arxiv.org/abs/2606.16961 · HTML: https://mlsanity.com/paper/2606.16961/

## Key facts

- No citing papers in the map yet (data through 14 Oct 2026).
- Builds on 9 of its 27 references that are in the map.
- First posted on arXiv 15 Jun 2026.

## Builds on (most cited first, 9 of 9)

- [Attention Is All You Need](https://mlsanity.com/paper/1706.03762/) (2017)
- [PyTorch: An Imperative Style, High-Performance Deep Learning Library](https://mlsanity.com/paper/1912.01703/) (2019)
- [Masked Autoencoders Are Scalable Vision Learners](https://mlsanity.com/paper/2111.06377/) (2021)
- [Context Encoders: Feature Learning by Inpainting](https://mlsanity.com/paper/1604.07379/) (2016)
- [A Unifying Review of Deep and Shallow Anomaly Detection](https://mlsanity.com/paper/2009.11732/) (2020)
- [Quant GANs: Deep Generation of Financial Time Series](https://mlsanity.com/paper/1907.06673/) (2019)
- [A generative adversarial network approach to calibration of local stochastic volatility models](https://mlsanity.com/paper/2005.02505/) (2020)
- [Deep Smoothing of the Implied Volatility Surface](https://mlsanity.com/paper/1906.05065/) (2019)
- [Deep calibration of rough stochastic volatility models](https://mlsanity.com/paper/1810.03399/) (2018)

## Abstract (arXiv)

We present a convolutional variational autoencoder for cryptocurrency implied-volatility surfaces, together with a deployable predictor that combines it with a quadratic smile re-fit through a deterministic per-tenor routing rule. Trained on 6,034 fully-filled hourly Binance Options surfaces of BTC and ETH spanning May-October 2023 and parameterised on a common 6 × 7 tenor-delta grid, the model attains a hidden-cell surface-completion RMSE in the 0.94-1.56 vol-point range across both markets and mask rates 10-50%. The hybrid predictor attains 0.83 vol points at 50% masking against 7.00 for the smile re-fit alone, an eightfold reduction obtained at no additional inference cost. Under structurally-correlated hole patterns that emulate the withdrawal of an entire tenor of strikes, the smile re-fit incurs 9.6-13.1 vol points of error while the learned model remains at 1.5-1.9, isolating a regime in which the generative model is the only viable predictor. Joint training on BTC and ETH improves the in-distribution model on both markets by 9-27% relative to the better-performing single-symbol counterpart, indicating a substantially shared vol-surface manifold across the two largest cryptocurrencies over the observation window. The hybrid is calendar- and butterfly-arbitrage-free at the listed strikes, a property that the parametric smile re-fit alone fails at high mask rates. The per-snapshot reconstruction error of the trained model flags the late-October ETF-anticipation rally and the August 17, 2023 flash crash as elevated-error periods without supervision. All training and evaluation infrastructure is released to support reproducible follow-on work.