Calibration of implied volatility surface using Tikhonov regularization

We examine the empirical performance of a Tikhonov-regularized implied volatility surface for the purpose of pricing European-style options. Our findings indicate that the performance of the model is comparable to the best performing implied volatility surface-based model reported in current literature. Moreover, the calibration of the Tikhonov regularized model requires significantly less calibration time than the implied volatility fitted by minimizing the nonlinear least-squares objective.