# Tagged Questions

The volatility of the price of the underlying security that is implied by the market price of an option based on an option pricing model.

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### Tradable information from BS Implied volatility

These are two follow up questions to: Implied volatility as price transform I understand that the BS model is used as a 'Blackbox' that takes a market price and maps it in a 1to1 fashion to a 'BS ...
1answer
249 views

### Hedging - calculating option prices using implied volatility surface

To hedge a strategy is it accurate "enough" to price an option using an implied vol curve vs moneyness (strike/spot) assuming sticky delta? The moneyness can be read off the chart, its corresponding ...
1answer
58 views

### Difference between Deterministic Volatility Function approach and Ad Hoc Black Scholes?

I am thoroughly confused after reading Dumas, Fleming & Whaley (1998) "Implied Volatility Functions: Empirical Tests". Both the Ad Hoc BS Model and the Deterministic Volatility Function ...
1answer
250 views

### Volatility Smile Approximation

Does anyone know what type of model is used to model the skew and IVs inside Thinkorswim platform for its volatility smile approximation? I am trying to replicate but do not know where to start. Any ...
1answer
1k views

### estimate implied volatility using newton-raphson in python

I am trying to calculate the implied volatility using newton-raphson in python, but the value diverges instead of converge. What is wrong with the code? ...
1answer
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### What equation will convert implied yield volatility to implied price volatility?

I am trying to figure out how to turn implied yield volatility of a short-term interest rate into implied price volatility. Is there an equation to do this? I have come across the equation for a ...
0answers
170 views

### Weighted average implied optionlet/swaptions volatility

Let an implied volatility curve/surface is made up by optionlets or swaptions Black's implied volatility. If you wanted to price, say, a FRN with cap and/or floor, a CMS et cetera you would input the ...
0answers
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### The name conventions such as ATM, Risk reversal and Butterflies to construct volatility surface

Why people call (vol call - vol put) risk reversal when risk reversal actually is (call 25 delta -put detlta +25)? when constructing volatility surface? The vol of risk revesal should not be vol call -...
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45 views

### Transition Between Volatility Regimes

Emanuel Derman wrote a great paper in 1999 about volatility regimes and the adjustments the market makes during these periods (sticky strike, sticky implied tree, sticky delta, etc). Has any ...
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### How can we observe volatility smile from the market. Drawbacks of Heston Stochastic Volatility Model

Here are two questions related to implied volatilities. a) The set up here is for an European option. We can get its implied volatility smile from calibration, the question is why could we also ...
0answers
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### Interest rates - Swaptions implied volatility - Volatility anchoring with Black and with normal volatilities

In a LMM+ with displacement factor a volatility anchoring technique is used, i.e. a long term volatility assumptions is applied, derived from historic time series. Should I adjust this historic ...
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### Inverse Smile Volatility Ibex35

I was analysing ibex implied volatility and when I draw it I found it was reversed: X axis are the strikes and Y axis implied volatilities calculated by BS. The blue line is the spot price. Data (...
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### Vol surface changes as underlying moves

We market make in highly liquid, near term options markets. I want to build a risk report that tells us how our portfolio's greeks will change as the underlying moves. This is for risk management in ...
0answers
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### Comparing Implied Vol. to Historical Vol. using intraday data

I'm interested in estimating what my profit/loss would be for continuously gamma scalping a delta hedged option over the course of one day, using historical intra-day price data. I found an equation ...
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223 views

### Formula behind pandas.Options() implied volatility

I noted that implied volatility (IV field) from pandas.Options class is very different (especially, for out of money options) than what I compute with Black-Scholes model. (risk free rate is pulled ...
0answers
495 views

### Implied volatility from American options using python

I am currently trying to construct volatility surface from american option prices (using Cox-Ross-Rubinstein tree) in Python 2.7. Below you can find the code I came up with. Any corrections would be ...
0answers
47 views

### Calculate minimum IV increase to offset theta

How would one calculate the minimum implied volatility increase necessary to offset theta decay? IV is typically a percentage, while theta is a dollar value. In theory I think I could look at what ...
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### Hedge volatility decreases

My particular options positions are typically a long delta, and long vega. Decreases in implied volatility, or specifically the VIX, can drastically alter the profitability of my position. Is there a ...
0answers
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### Underlying changes impact on implied volatility

What are some valid techniques that can be used to simulate how changes in the underlying are most likely to impact implied volatility along with the skew of all strikes for options with the same ...
0answers
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### BS Implied Volatility under Normal returns

If I use theoretical prices under a normal valuation model, and I estimate their implied volatility using BLACK SCHOLES implied volatility, do I'll get corresponding log normal volatility?
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### Implied volatility and greeks for american option with discrete dividends

What methods are available to calculate IV and greeks for an american option with discrete dividends, and how do they compare? Should I use Roll-Geske-Whaley and solve for a given option price?
0answers
468 views

### Interpolate option volatility in delta space in R

I have a bunch of deltas and option implied vols at those deltas. I would like to interpolate them in R. Interpolating them in delta space seems difficult, since normally you would like the ATM calls ...
0answers
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### Comparison of Implied Vol Models

My goal is to evaluate a collection of implied volatility models for accuracy supporting real time theoretical pricing of listed equity option. My current research approach is to define a set of ...
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### IV of stocks vs IV of options

As for as I have seen, Implied volatility of stocks are easy to understand as there will always be a peak and fall(usually on earnings announcement dates). The magnitude differs but the wave pattern ...
0answers
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### What kind of crisis can drag Implied Volatility down globally?

I want to trade buying long straddles with low IV ranks. I wonder what could be a crisis for me. I believe any kind of economical crisis would increase the IV. What happening could be a crisis for me? ...
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### Implied volatility: sensitivity to the underlying spot price

Is there a formula for determining the sensitivity of IV to the underlying spot price?
0answers
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### commodities index volatility

Suppose that the average one year implied at-the-money volatility of the sub sector indices making up the BCOM is at 20% and that the sub sectors are uncorrelated. Bearing in mind the effect of ...
0answers
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### Spotting humps in implied volatility term structure

Sometimes implied volatility term structure performs a hump shape. How can I measure the frequency of hump appearence? Basically, I have several years of daily data on IV TS, how can I count the ...
0answers
109 views

### Delta Volatility Surface Usage to value the option

I always find myself in the unknown charted territory when it comes to non-Linear Instruments. I come across the scenario, How to value the option using Delta Vol surface? Example I have CME traded ...
0answers
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### Impact of Implied skew variations on future prices

I want to test the relationship between of the oil implied volatility skew and oil future prices. I'm lost regarding the method to test the relationship. I was thinking about a regression but I'm ...
0answers
58 views

### How to compute return of a variance swap?

How does one calculate the investment of a zero initial investment asset, specifically a variance swap? In this asset the payoff is given by the difference between the realized variance in a certain ...