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

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96 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 ...
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1answer
144 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' ...
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1answer
138 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 ...
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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
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3answers
454 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
116 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 ...
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1answer
161 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 ...
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1answer
82 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 ...
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163 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 ...
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217 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 ...
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2answers
99 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 ...
2
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1answer
112 views

Is the volatility of a trader's wealth equal to the volatility of the underlying assets traded?

Assume that a trader trades in several stocks with different volatilities. The return of the trader's portfolio would be the weighted average of returns and the risk would be a function of the the ...
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83 views

Volatility swaps historical data

I am preparing a study about Volatility and Variance Swaps. Does anyone know where I can found historical public data regarding this instruments? Thanks!
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109 views

Volatility tools / web sites?

Could someone give recommendations regarding volatility tools / web sites that they find useful? I am looking for information that my brokerage platform does not provide. Specifically, I want to see ...
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2answers
433 views

Optimal lag length selection criterion in GARCH(p,q) model using MATLAB

As assessed by the title, I'm trying to estimate a GARCH(p,q) model to forecast stock market volatility and, in order to be able to do that, I've to identify the optimal number of lags, p and q, to ...
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0answers
135 views

Monte Carlo American Option Pricing under GARCH(1,1) volatitliy

I am attempting to price a couple of at-the-money American option using the LSM algorithm and GARCH(1,1) volatility. The LSM code I have works correctly for constant volatility, however, when I switch ...
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103 views

Fitting Egarch Model

I am performing a monte-carlo simulation in MATLAB for the first order EGARCH model in which case I am simulating 100 paths of size 500 assuming Gaussian and Student's-t distributions for the ...
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60 views

Volatility Minimum Analysis for Trading

I have been back testing some algorithms against a low volume highly volatile stock. I've found that during low volatile periods the technical indicators are following noise more than real trends. ...
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248 views

Do intraday volume and volatility share the same properties?

volatility clustering and mean reversion are very well known properties that one could use when trading. Traders, especially in options world, do take realized vol into account (e.g. by forecasting it ...
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2answers
603 views

Delta Neutral / Gamma Neutral Positions

I've been trying to find out more about options positions which are both delta neutral and gamma neutral--created with some kind of calendar spread. Supposedly, such a trade will be perfectly hedged ...
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80 views

How to calculate modeled asset volatility by industry factor?

Currently I am working with huge data frame which consists of a lot firms. For each firm in my sample I calculated asset volatility ( I am using Merton default probability model, so I have used 2 ...
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1answer
172 views

What return equation is Engle referring to in his Nobel lecture?

Engle comments in "Risk and Volatility: Econometric models and Financial Practice" that If the price of risk were constant over time, then rising conditional variances would translate linearly ...
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145 views

What's the link between EURIBOR3M futures volatility and rates volatility?

If I am not wrong, EURIBOR3M futures with maturity $T$, whose price is $F_{T}$, are quoted like contracts which express the underlying forward rates, $r_{T}$, as $$r_{T}=\frac{100-F_{T}}{100}$$ Now ...
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81 views

Time-Varying Volatility and Conditional Likelihood

Engle's comment in his seminal paper "Risk and Volatility: Econometric models and Financial Practice" mentions that I had recently worked extensively with the Kalman Filter and knew that a ...
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155 views

Does Bakshi, Kapadia and Madan (2003) VIX building approach underestimate volatility?

From a paper that shortly addresses an alternative approach to VIX-like index building: To test this approach, I've built a fake book of B&S options with constant volatility equal to ...
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80 views

Derivation of variance of Zhou (1996) volatility estimator

Does anyone know how to derive the Variance of Bin Zhou's volatility estimator (Theorem 1) in 'High-Frequency Data and Volatility in Foreign-Exchange Rates' (1996) Zhou 1996 Any help would be ...
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1answer
172 views

Directional View of Volatility

What is an option strategy that someone could employ to simply go long/short volatility?? Assuming I want 0 delta(0 gamma if possible) risk in my option position, how do I take a directional view on ...
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108 views

Model calibration to illiquid assets when pricing options with long maturities

Let us assume one is interested in pricing an option with a very long maturity (up to 20 or 30 years) on a liquid underlying. The market won't have liquid quotes for the higher maturities. Still you ...
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49 views

Realized volatility Create index from individual stock data?

I am about to estimate realized volatility on high frequent stocks. I am aware of the implications of the model (e.g. microstructure etc.) But what I dont know is how I can create an index to estimate ...
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3answers
170 views

Why are short expiries associated with more pronounced volatility skews?

I've noticed that for a given strike price, the shorter expiration dates of options have more pronounced volatilities why is that?
3
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1answer
168 views

Calibrating Hull-White using volatility data

I would like to calibrate Hull-White model using volatility data.I am using [Park (2004)] paper as a reference. He suggests to minimize the following objective function: where the first term is ...
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118 views

Reasoning for Bloomberg's short rate volatilty calculation

Bloomberg, in its documentation, explains that it calculates the short rate volatility for its Hull White implementation by multiplying the e.g. 10y IRS rate (divided by 100) by the 10y cap vol. Why? ...
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1answer
132 views

Volatility calculation for intra-day cash-or-nothing call binary option

Firstly, I do not have a quant finance background. This is new to me, and I imagine that this is a basic question for this group. I am calculating the price of a binary/digital option with ...
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253 views

what's the relationship between forecasted stock volatility and implied volatility?(option)

what's the relationship between forecasted stock volatility and implied volatility? I know that implied volatility is the volatility calculated by BS formula, is there any relationship between implied ...
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75 views

Recalibrating SABR parameters for Swaption ATM volatility

I understand that the ATM volatility of Swaption moves quite frequently and the SABR will need to be recalibrated. Which parameter should I recalibrate? Is there any financial meanings why we only ...
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107 views

First Exit Time Based Volatility

I'm hoping that someone could help better explain why $\sigma$ (equation 2.19) must be multiplied by $\frac{4n}{4n + 1}$. Obviously all the math is there. Perhaps someone can make this easier to ...
4
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1answer
171 views

Is Cubic spline Interpolation on swaption Volatility arbitrage free?

If I use interpolation technique such as cubic spline to estimate volatility of Swaption with different strike,(with a given forward rate, swap and option maturity) will this be arbitrage free? What ...
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58 views

Clarifying the way in counting number of weeks for calculating historical weekly volatility in Bloomberg

I would like to confirm the way to counting number of weeks for calculating historical weekly volatility in Bloomberg. Given an option with issue date from 14/1/2014 to 13/1/2019, is the proper way to ...
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2answers
313 views

Expected value of Black-Scholes

(Apologies for any formatting mistakes) Within the Black Scholes model, given that you are estimating the volatility from historical data - and all other parameters assumed exact - one usually ...
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1answer
119 views

What is the realized volatility's estimation error?

Given an estimation procedure and real data, how would one compute the mean squared error? What value represents the "true" realized volatility in the case of calculating the Mean Squared Error in ...
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4answers
149 views

Error message in calculation Implied Volatility

I am unsuccessfully trying to find the Implied Volatilities for the SPX on a given date using information of the CBOE, as well as Open Interest, but as I run the code I am getting and error message ...
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3answers
717 views

How to trade volatility?

I am analyzing the volatility of financial stock returns and let's say I have a pretty good model to forecast tomorrows volatility of the stock returns. So let's say for simplicity reasons I have a ...
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112 views

Log returns and time

In calculating realized/historical vol for fx spot, my samples/fixings are currently every minute. I need to be able to calculate and plot historical/realized vol on demand from spot prices. ...
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1answer
203 views

Evaluation volatility with Garch model

I want to forecast the volatility (with Garch) of a canadian stock in 5 months with daily returns. How many data do I have to collect ? Thanks.
5
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2answers
404 views

How to use a realized kernel?

I've read that realized kernels are the thing to use for calculating daily volatility from high-frequency data. So I've got minute data, how do I actually use such a kernel? Will it give me minute-ly ...
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1answer
153 views

Basics about the scaling property of volatility

It is a usual practice to calculate realized volatility $\sigma$ using the square root of the usual variance estimator $\hat{{\sigma}²}$. This is done using the stock log returns (practitioners ...
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246 views

Extrapolating implied volatilities to small time

Could anyone please direct me to literature or methods for extrapolating the implied volatility surface towards small expiry? I'm looking to price very short time to expiry binary options (e.g. 5 ...
3
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2answers
296 views

How to compare volatility models?

What are the most popular ways to compare volatility models? Suppose I wanted to compare the forecasting accuracy of a GARCH(1,1) model with the historic 30 day volatility. What method should I use? ...
2
votes
1answer
143 views

evaluation of volatility models using loss functions

This question has two parts, What is the state of the art in an academic or public knowledge sense of volatility forecast model evaluation? Since there are many methods out in the wild, and do ...
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271 views

What good papers of short term (<30 seconds) volatility estimation

I am looking for good papers of short term (<30 sec) volatility estimation AND short term volatility forecasting. Do you have something in mind ?