A measure of the variation in price over time. Also a measure of the risk of a financial instrument.

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30 views

Approximation of different volatilities

Suppose I model the forward swap rate lognormal $$dS_t = \sigma_{ln}S_tdW_t$$ On the other hand we could model it simply by a normal assumption: $$dS_t = \sigma_{n}dW_t$$ I would like to know if ...
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1answer
44 views

Probability of stock closing over a certain price

A stock has beta of 2.0 and stock specific daily volatility of 0.02. Suppose that yesterday's closing price was 100 and today the market goes up by 1%. What's the probability of today's closing price ...
2
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1answer
89 views

Volatility of Futures

Apparently: Under a constant interest rate, the futures price is given by a deterministic time function times the asset price (I think I understand this). This means that the volatility of the ...
2
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0answers
30 views

Testing for the presence of a positive or negative gamma effect

I am currently analyzing a statistic that I believe will have the effect of hedgers having a positive or negative gamma position in certain stocks. In the case where I believe hedgers have positive ...
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0answers
92 views

How does Volatility Pairs Trading work?

I've read some material related to pairs trading for equities and I understand the process of finding non-stationary pairs price series that can be cointegrated to form a stationary series. The basic ...
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0answers
50 views

How to Calculate Confidence Intervals for Moving Averages Given Nonindependence?

I've plotted 30-year moving averages across time for a couple of portfolios, and I was wondering how to calculate a 95% CI for the these moving average data (i.e., across all moving average data ...
0
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1answer
74 views

How to calculate the volatility matrix with multiple stocks

calculating the volatility for a single stock is straightforward. However, I'm not sure whether my approach for calculating the volatility matrix for multiple stocks is correct: I assume a log-normal ...
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0answers
60 views

Models for volatility estimation of high frequency data?

I have read on several news articles and research papers, "Contrary to popular belief, high frequency trading reduces volatility in stock markets rather than exacerbates it". Do you know the models ...
3
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1answer
72 views

Cross-sectional volatility vs temporal volatility

Volatility is usually defined as the standard deviation of returns, but sometimes it is calculated as the standard deviation of cross-sectional return divided by the square root of time, where other ...
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0answers
45 views

Negative Risky vs Negative Butterfly

I understand that in regard to FX options, a volatility smile with negative Risk Reversals is effectively indicating that the spot market for a given currency pair is in decline (puts over). In ...
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0answers
65 views

robust regions in grid search

I have a strategy f that takes parameters x,y (for x,y taking values in integer ranges). I get two grids (of returns and volatility values) from computing f(xi,yi) for integer ranges x1 <= xi <= ...
2
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2answers
148 views

2 stocks, no shorting vs shorting. (concrete questions, mean-variance)

I'd appreciate help with the following questions. Suppose there are two stocks $A$ and $B$ with expected returns $E_A, E_B >0$ and volatilities $v_A, v_B >0$, respectively . Also, suppose ...
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0answers
42 views

commodity futures pricing vs. underlying spot rates in volatile markets, at depth of book

Are futures contracts or their underlying spot rates, more or less efficient, at depth of market, with volatility? Say for example we have: 1 E7 (CME contract) = 62,500 euro Should the future or ...
0
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1answer
29 views

Common point between IR and Vol option pricing models?

What is the common point between pricing models on options on Interest Rates and options on Volatility?
3
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5answers
123 views

economic facts that causes the financial time series to be heavy tailed

When reading a tutorail on extreme value theory, I once meet the following claim ...
5
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1answer
202 views

Regime-Switching Model for detecting market shifts

I'm always wondering whether anyone has utilized regime-switching models successfully in forecasting or trading. Academia has long discussed this topic in-depth, such as using Regime Switching ...
2
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1answer
64 views

Swaptions vol trading lognormally

What does this mean: "Front-end vols have been trading lognormally while longer tails have traded normally." I read this in a research report, in the context of ...
0
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2answers
116 views

Beta of FTSE100 stocks against benchmark index FTSE100

first post so if I write something silly don't hold it against me. I calculated beta for almost all the stocks that compose the FTSE100. All have beta < 1. This, as far as I understand it, means ...
2
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2answers
121 views

Understanding the conditioning in a GARCH process

In a GARCH model like the following $$y_t=\sigma_tz_t,\\ \sigma_t^2=\omega(1-\alpha-\beta)+\alpha y_{t-1}^2+\beta \sigma_{t-1}^2$$ where $z_t$ is assumed to be iidN(0,1), we say that conditional on ...
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1answer
60 views

Controling ex-post volatility by ex-ante limits

In the context of mutual funds the KID directive forces us to calculate 5 year ex-post volatility of a (market) fund (weekly returns). Thus each week we look back in the past and calculate volatility ...
3
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1answer
182 views

Why parameterize the Black Scholes implied volatility surface?

I know that SVI volatility surfaces are very popular among financial practitioners. I understand that this is not really a model for some underlying asset (such as Black Scholes, Heston etc.) but ...
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4answers
386 views

Why is the VIX futures market usually in a state of contango?

I'm a VIX newbie and I'm trying to understand why the VIX futures market is usually in a state of contango. All I can figure is that the sellers of VIX futures contracts demand high "prices" (because ...
1
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2answers
61 views

Standard Deviation as listed in Rebonato's Volatility and Correlation: Binomial Replication 2.3.4 Worked-Out Example

I am reading Rebonato's Volatility and Correlation (2nd Edition) and I think it's a great book. I'm having difficulty trying to derive a formula he used that he described as the expression for ...
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0answers
97 views

Calculating volatility of inhomogeneous time series

I am reading an article by Zumbach and Müller whose name is Operators on Inhomogeneous Time Series. This is interesting in general, but my main goal is to learn a good and efficient method to ...
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1answer
97 views

Volatility of Option

I hope I'm asking this at the right place. This pertains to actuarial exam MFE/3F on Financial Economics. If $\sigma$ is "volatility" and $\Omega$ the elasticity of the stock, one formula that is ...
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1answer
92 views

Interpolation of volatility curve for Swaption

I have found volatility in the black model for swaption for different maturity (1-2-3-6-9M, 1Y, 18M, 2-10Y, 15-20-25-30Y) and Tenor (1-10Y, 15-20-25-30Y). Now I need another values (Maturity: 2, ...
3
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1answer
160 views

What exactly is the OIS Black VOL?

While poking around in Bloomberg I stumbled upon the following data set: EUR SWPT BVOL OIS for various maturities. Obviously OIS must suggest OIS-discounting but how is it related to the ...
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0answers
49 views

Volatility clustering but (G)ARCH not good fit

I'm looking at a time series that appears to be white noise. The ACF/PACF are in the test bounds. Applying the Ljung-Box test for various (maximum) lags gives me high p-values (i. e. I cannot reject ...
0
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1answer
104 views

What is the equation for Garman-Klass volatility?

I want to calculate realized/historical volatility for the underlying products of various options using the Garman-Klass estimator, but I can't see to find an equation, although I know it involves ...
2
votes
1answer
81 views

Asset volatility in Merton model

I am currently working on my thesis where I discuss the Merton default probability model. I have a huge sample of US firms for the period 1990-2010. I use both numerical and complex iterative approach ...
11
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2answers
362 views

Relationship between Large Cap and Small Cap Volatility

Relative value of large cap volatility. We all track the VIX as a measure of volatility, but we often forget that the VIX is volatility indicator for the large cap index within the SP500. We can ...
0
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1answer
108 views

Where can I find historical data for volatility estimation?

I'm trying to estimate volatility following Shreve book, so I need observations of $f(t_j,t_j+\tau_k)$ and $f(t_j+\delta,t_j+\tau_k)$, where $t_J<t_{J-1}<\dots<0$ and $\tau_k$ are relative ...
2
votes
1answer
155 views

Square-root-of-time and autocorrelation

My question is that when we have autocorrelation in daily volatilities can we scale daily volatility to annual basis using square-root-of-time rule? Does it breach the main assumption of the rule ...
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vote
3answers
100 views

What does “true”volatility mean in volatility comparison?

In Sinclair's book, wee need to compare standard deviation with "true volatility" to check the power of the model suggested, close -to-cloce, or Parkinson formula, etc. What do we mean here by "true" ...
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0answers
60 views

calculation of parameters in Stochastic Volatility

I want to compare volatility models from constant volatility, implied, time-varying (ARCH, etc) and stochastic volatility. I can find the process to calculate constant, implied and ARCH and GARCH ...
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0answers
56 views

Stochastic Volatility for Stocks, FTSE

Can someone help me with calculating Stochastic Volatility (of stocks and options) using SAS or R or Matlab please? I am new to SAS and I am trying to use Heston model, White-Hull model or any other ...
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0answers
65 views

Adjusting for variance bias when using overlapping data

I'm in the process of constructing volatility cones for several assets and I want to make sure the data is free of biases. I know that using overlapping data introduces an artificial degree of ...
0
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0answers
47 views

What are the estimation methods for SV models?

I want to know about some methods like Methods-of-Moments, Quasi-Maximum Likelihood method, Baysian methods using Markov Chain Monte Carlo methods. Is there any reference to have an idea of these ...
4
votes
3answers
336 views

Volatility arbitrage - how is the profit extracted?

Is there any paper that describes in detail how the profit is extracted in directional volatility bet (vol arb)? I mean in the case that I bet the realized volatility will be lower than currently ...
0
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1answer
73 views

Close price or adjclose price to calculate volatility?

To calculate volatility, which price in FTSE table is used? When do we use close price for calculating volatility? Do we use adjclose (adjusted close price) for calculating volatility as well? when ...
3
votes
1answer
127 views

Estimating Beta from unevenly spaced price history

I have a certain non-stock asset that has 1 transaction every 1 to 8 months. I also have a price index of that class of asset compiled by another party on monthly basis. If I regress $price = \alpha' ...
1
vote
1answer
125 views

How would you correct a GARCH model to deal with non mean reverting volatility?

I am currently attempting to model and forecast volatility of bitcoin but have not been able to find a GARCH model that fits the data appropriately. I've used tick data sampled at 1 hour intervals ...
0
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0answers
27 views

Developing an Android App. Need free volatility data [duplicate]

I'm currently developing an android app that requires volatility data. Any idea where can I get it for free? I tried Yahoo Finance API and they don't seem to have volatility data. Thanks
0
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2answers
289 views

Trading spot volatility

I am reading a paper that very briefly talks about some volatility arbitrage strategies. It's so brief that I do not exactly understand how it works. It says one of the strategy is based on "short ...
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1answer
91 views

Price volatility and yield volatility

This question is a bit confused, but please bear with me. Now and then I see people use the terminology "price volatility" and "yield volatility" in connection with bond options. I understand the ...
2
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1answer
144 views

How to compare different volatility measures?

I read the Euan Sinclair's book (Volatility trading) in which he suggests different volatility estimators (Close-to-close, Parkinson, Garman-Klass, ...). I am inquiring about what is the best stock ...
1
vote
1answer
81 views

what is the vol in the BS formula?

I need to compute the delta of an option for which I know a) the time to maturity, b) the price of the option, c) the price of the underlying asset. what is the formula to get this delta It seems ...
2
votes
1answer
146 views

Value at Risk from Delta of a single asset portfolio

I am trying to figure out the following, for me unfamiliar type of question: Given is a single asset portfolio: the Delta of the portfolio is 15, the value of the asset is 10 and the daily volatility ...
3
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2answers
176 views

SABR model inconsistent with Black Swaption Pricing

I am confused on the following: When we price swaption, the market convention is to use Black's Model which assumes forward swap rate is following Black's model under the Q(t) measure. When we tries ...
2
votes
2answers
93 views

What impact does arbitrage have on realised volatility estimates?

Doing some research modeling/estimating volatility in the bitcoin market. There is quite a bit of scope for arbitrage within crypto-currency markets. Wonder if this has any impact on my volatility ...