best model for equity vanillas

[chrisd]

I am just wondering, what sort of models (generally speaking) do vanilla equity trading shops use? Obviously, valuation is not the issue, but i imagine one would want something that fits well to the steep short dated skews, has reasonably stable calibration, and produces accurate greeks (eg, delta compensating for sliding up and down the skew), and is fast - something analagous to the way SABR is (or was?) used in interest rate vanillas. I would think that BS or local vol would not give accurate greeks owing to their lack of accurate smile dynamics.

 

[Andy Nguyen]

This paper (by Derman at GS) is old but may give you some useful info
Forum | Quant Network - Download Research Papers - [GS Research Notes] The Local Volatility Surface