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

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2
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3answers
465 views

How to predict daily range of forex?

I am trying to predict the intraday moving range of stock/forex (essentially, high-low). Here are some ideas based on what I've been reading recently (do not have quant background, so basic level of ...
4
votes
1answer
90 views

Swaption Volatility Cube arbitrage

How can I exploit an arbitrage by violating the following no-arbitrage condition (taken from the paper "Arbitrage-Free Construction of the Swaption Cube" by Simon Johnson and Bereshad Nonas): Swptn(K,...
2
votes
4answers
10k views

Relationship between Beta and Standard Deviation

I was doing some financial analysis on two firms in the coffee industry. After calculating Beta and Standard Deviation for both firms, I seem to have stumbled on some weird phenomenon. It appears ...
4
votes
1answer
87 views

A question on implied volatility surface

Let a stock price process be $(S_t)_{t\geq 0}$ and let $(K, T)\longrightarrow \sigma^*(K,T)$ be the volatility surface corresponding to vanilla options on the stock. What is, for any time $T$ the ...
4
votes
1answer
194 views

VXV vs. VIX futures: arbitrage opportunities?

At a first glance, VXV and VIX futures should not be compared at all: VXV is an underlying index, whilst VIX futures are derivatives written on a different underlying index, that is, VIX. As instance,...
11
votes
7answers
17k views

How to calculate historical intraday volatility?

Sorry for what must be a beginner question, but when I went to write code I realized I didn't understand exactly how historical volatility, or statistical volatility, is defined. Wikipedia tells me "...
2
votes
1answer
101 views

GJR-GARCH with $\alpha = 0$ as parameter estimate

I am estimating a GJR-GARCH(1,1) model with variance targeting in R. As data I am using returns on some stock indices. While calculating the GARCH models I obtain $\alpha=0$ for some indices. From ...
1
vote
1answer
55 views

Events effect on intraday volatility and large outliers

I have an event that takes place over a period of a few days, and I want to estimate the effect it has on market volatility using intraday data with one minute frequency. The problem is, that e.g. ...
8
votes
3answers
230 views

Why is volatility said to be persistent?

Persistence in volatility of stock returns is one of the common 'stylized facts' when it comes to analyzing time series. However, I am wondering for theoretical arguments why (estimated) volatility ...
1
vote
0answers
59 views

Higher moments arbitrage

Is there concrete evidence that statistical arbitrage (historical vs. implied) on higher moments, specifically skewness and kurtosis, can be (significantly) done? Working from this source, the author ...
10
votes
3answers
381 views

Historical Volatility vs Implied Volatility Performance in Pricing Options

I consistently read on academic papers, when pricing options, using implied volatility is better than using historical volatility. Because, market is more "forward-looking" and historical data is "...
4
votes
1answer
602 views

How to calculate implied volatility smile of basket using correlations?

For a basket, the realized volatility can be calculated using: $$\sqrt{\sigma_1^2 + \sigma_2^2 + 2 \sigma_1 \sigma_2 \rho}$$ If I have the volatility surface of two underlyings S1,S2 (strike space). ...
1
vote
3answers
157 views

Evaluation of portfolio other than Sharpe Ratio

Is Sharpe ratio always the best way to evaluate a portfolio? I'm not really sure what this potential interview question wants me to answer. I have read that Sharpe ratio essentially explains how ...
0
votes
1answer
63 views

CCC-Garch predict

So I'm trying to measure the VaR of 2 stock with a multivariate GARCH model, so im using the CCC model. I need to predict the standard-diviation and the mean but the ...
-3
votes
1answer
77 views

Master thesis in Finance in search of topic concerning investor sentiment and financial crash

Is there any good idea that combines low volatility, risk aversion level of investors and prediction of financial crash ? Is there any literature?
4
votes
2answers
158 views

Constructing a minute-by-minute volatility curve

For market making in front month vanilla commodity options we need a volatility curve that updates every second or so as the underlying and the options change prices. If all the strikes have a good ...
6
votes
1answer
1k views

Problems with dealing with GARCH models and intra-day data

A Short question would be "Which type of model from GARCH family is most suitable for modeling 5-minute data returns ?" but I've added some story to it. A Long time ago I was preparing my thesis, one ...
3
votes
1answer
182 views

Find call and put volatilities using ATM, Risk reversal and Butterflies volatilities

I have to plot the implied volatility surface for EUR/USD. So, my goal is to produce something like that, from put delta 10 to call delta 10: Searching for informations, I found that I could find ...
4
votes
2answers
69 views

Intraday Volatility over multiple timezones

I'm in the Europe/Berlin Timezone and I need to calculate a global volatility indication Monday to Friday at 12:00. My portfolio can somewhat accurately represented by 60/30/10 S&P500, ...
1
vote
2answers
134 views

Which volatility to use?

For calculating the greeks http://www.vollib.org/html/apidoc/vollib.black.greeks.html Should I use historical volatility or implied volatility?
1
vote
3answers
147 views

Appropriate measure of risk if return are not normally distributed

Normally standard deviation of an assets is used as an proxy for the risk in the financial market. In reality distribution of return is more peaked at the center and higher mass in the tail as ...
0
votes
1answer
65 views

What is the formula that determines when VIX futures expire?

Or a source that will allow me to just get the list of dates into a program, I'm trying to do this in python but I want it to be able to figure out the next expiration automatically, or something like ...
1
vote
1answer
103 views

How to determine volatility for private company for Black-Scholes

I am trying to determine the volatility to use Black-Scholes to value some warrants for a private company. Very few comps are public or they are large diversified businesses. Any thoughts on how to ...
0
votes
0answers
52 views

Delta of an option in two cases

Let C be the prime of a call in fi=unction of the price in term F, Strike K, volatilité $\sigma$ and maturity t: $C(F,K,\sigma,t,r) $ We assume that we know $\delta$ $\delta=\frac{\partial}{\...
2
votes
2answers
196 views

Forecast of volatility

What are the well known methods for forecasting (daily - weekly - monthly) volatility of a stock price? How about a bond price? Let's say I have in my disposition the price time series at a very high ...
1
vote
0answers
176 views

Historical volatility on bloomberg API

Is there a way to obtain the historical volatility of a stock from the bloomberg API? I would be looking for the data in the HVT table. Actually 3-months historical volatility from now would be enough....
3
votes
1answer
88 views

Approximation of an option price

The value of an option in the money is 11.50 Euros. The parameters of the market are: -The price of the underlying stock: 81.4 Euros. -The volatility ofthe underlying is : 34.65 % The ...
0
votes
1answer
112 views

RiskMetrics VaR Volatility Sample Size

RiskMetrics calculates volatility using an exponentially weighted moving average. For a decay factor of 0.94, they advise a sample size of 74 past returns. Does this mean the entire calculation should ...
0
votes
0answers
21 views

How to appropriately measure volatility in assets with different execution dates?

Let's say I have two assets and I am hedging them with going short on two other assets. Let's say that asset 1 is expected to expire in one day and asset two is expected to expire in two days. Let's ...
2
votes
1answer
51 views

Integrated volatility

Can someone give me an explanation of what integrated volatility is (and possibly why it is preferred) versus a standard measure of volatility eg variance?
0
votes
1answer
51 views

Volatility of monthly performances, where the last month is short

I'd like to calculate the vol of a return series of, say, 25 months. However, the last of those months is not completed yet. The last data point only refers to the first 21 days of the month (say, ...
1
vote
1answer
59 views

Is there any package in R for conditional autoregressive range model (CARR)?

I am working on a project which requires volatility estimation using range based volatility. Is there any package in R which helps me in estimating the CARR model proposed by Chou (2005).
2
votes
2answers
443 views

Ideas about Stochastic volatility models

I am currently working on comparing different models for modelling the volatility and then pricing vanilla options (I use option prices on real stocks in order to calibrate my models and then I ...
3
votes
6answers
229 views

Intuitively speaking, why do at the money options have no volga/convexity?

I was wondering if someone could give me an intuitive explanation as to why the vega of at the money options doesn't increase with volatility. I've seen some mathematical explanations showing the ...
9
votes
3answers
352 views

Why is there a stong intraday-correlation between spot and vol?

Fig.1 shows an intraday scatterplot of the DAX future against its volatility index VDAX on 6-Jan-2016. The data suggest a strong negative correlation between the two. There are various models ...
0
votes
0answers
32 views

Could VVIX and HYspread combined make for a SPX trade signal?

assumption 1: if there is no excess liquidity, then prices of equities cannot rise assumption 2: if there is "sufficient" excess liquidity, then whether prices of equities rise, stay put, fall depends ...
0
votes
2answers
92 views

Volatility of EUR/USD: is this correct?

Let x be the closeBid price of EUR/USD, sampled every 5 minutes during year 2015 (historical data). This is the variation (is it ...
2
votes
1answer
66 views

Estimating volatility from high frequency price volume data of multiple stocks

I have price volume data of five stocks, sampled at 1 minute interval for six months. The data is quite noisy, lots of missing data and also some weired spikes. Can someone suggest me how to clean ...
2
votes
4answers
82 views

Do stocks move up and down in value or in proportion to how much they cost?

Do stocks change in value or in proportion to how much they cost? If a stock costs 100 dollar will it generally change value at the same rate as a 700 dollar stock (IE: both will move about 2 dollars ...
4
votes
1answer
221 views

Fitting a non linear AR + GARCH(1,1)-M model

I want to fit the following model to a time series: $$ y_{t}=\alpha_{0}+\alpha_{1}y_{t-1}+\alpha_{2}y_{t-1}^{2}+\lambda h_{t}+\varepsilon_{t} $$ $$ h_{t}=\beta_{0}+\beta_{1}\varepsilon_{t-1}^{2}+\...
5
votes
2answers
194 views

How to derive this approximation of the risk-neutral expectation of the variance?

On the paper Bollerslev, Tauchen and Zhou (2009 RFS) the authors say about equation (15): The corresponding model implied risk-neutral conditional expectation $$E^Q_t(\sigma^2_{r,t+1})=E_t(\...
1
vote
1answer
51 views

impact model what volatility to use

I am looking at the market impact paper here (http://www.cims.nyu.edu/~almgren/papers/costestim.pdf) and I had a question about volatility on page 11. On page 11 it is stated: "For volatility, we use ...
10
votes
2answers
1k views

Risk Budgets with Target Portfolio Volatility

I'm working through the implementation of a risk budgeting approach as described in the recent Roncalli paper. The idea is that the portfolio manager sets a contribution of total portfolio volatility ...
0
votes
2answers
53 views

Black Scholes Implied Volatility -> Put call parity

The theory says that the put and call with the same maturity and strike have the same volatility. I have been resolving the Black Scholes equation after IV using equity and fx market data and I can ...
1
vote
1answer
102 views

how to do interpolation in the term structure of volatility surface?

everyone~ I am a newbee in the quantitative finance and I meet a problem in working out an equity option volatility surface. We use the reasonable market data to derive the implied volatility, then ...
0
votes
1answer
31 views

Calculating Volatility Parameter using Closing Prices [closed]

Say you have 3 closing prices... 101 100 102 How would one calculate the standard volatility parameter using these values? I am quite confused, it seems simple enough though.
1
vote
2answers
129 views

Which one is best Performance evaluation measures?

I want to compare the performance of various volatility models like GARCH, eGARCH, and gjrGARCH from actual volatility(computed using high frequency data). I found 3 common performance evaluation ...
9
votes
3answers
349 views

Why do volatility and correlation increase in times of crisis?

can somebody please explain to me why volatility and correlation increase in times of crisis? It is connected somehow to the herding effect. But I cannot really explain it. And also why are negative ...
2
votes
0answers
48 views

When to use SV or a GARCH model

So i have been searching for this answer for a question if there is a rule or something that would say when to use GARCH type model or use an stochastic volatility model to predict the volatility of ...
9
votes
1answer
137 views

Estimate Beta of CAPM from Implied Volatility?

In the CAPM theory Beta of asset $i$ are estimated in this way: $ \beta_i = \frac{\sigma_{im}}{\sigma^2_m} $ where $\sigma_{im} = \rho_{im} \sigma_i \sigma_m$ But all these data are historical data. ...