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

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51 views

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 ...
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37 views

Reputational Harm

How would you measure the reputational harm incurred on an individual by an organization. How is Market Pricing in the expected payout resulting from the law suit by an individual ? The news breaks ...
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129 views

How to hedge a long stock with the corresponding volatility ETF

Let us say I want to establish a market neutral position. So if I buy 50 shares of stock (SPY) and I want to delta hedge, I sell an ATM covered call. So that brings the position delta to 0. Now, I ...
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201 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 ...
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69 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 <= ...
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2answers
107 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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142 views

Reference request about stochastic volatility model

I'm fiddling with estimation of stochastic volatility models and have build up a somewhat flexible framework using indirect inference. I would like to try and throw a lot of different continuous ...
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157 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 ...
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54 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 ...
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207 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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156 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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107 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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68 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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90 views

How to measure if variance is greater at a certain time of day?

I'm not very fluent in the quant vernacular, so perhaps the nature of my question will be better illustrated as a hypothesis. One market has closed and another market elsewhere on Spaceship Earth is ...
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677 views

Using volatility cycles to switch between trend following & range bound trading? [closed]

"...a low volatility environment is usually a good environment for trend following strategies; see Jez Liberty’s state of trend following report here..." ...
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1answer
47 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 ...
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1answer
136 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 ...
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2answers
550 views

Why the implied volatilities calculated are so different

I Calculated facebook option(expired in 12/4/13) Implied Volatility with the Bisection Method. The program will be attached at the end. The results for different strike prices are so different: ...
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1answer
300 views

compute FX forward from broker's data

assume I have following delta-term vol data from broker: ...
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1answer
47 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 ...
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1answer
66 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 ...
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1answer
48 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, ...
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2answers
69 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 ...
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148 views

How to handle currency change in exchange rate volatility measurement

I am trying to measure exchange rate volatility in some countries and I am using their currencies against euro. Problem is that one of them is Slovakia which has changed the currency in 2009 from ...
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1answer
220 views

Realized Volatility vs. Standard deviation of log returns

I am interested in calculating high frequency 5-minute intraday volatility. I am going to use the standard Realized volatility which is the square root of the sum of squared log returns. Given X is ...
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1answer
60 views

Portfolio volatility

Problem True or fale? The stock of a firm has an expected return of 10%, and a volatility of 10%. The weight of the stock in a portfolio is 5%, and the correlation of the stock’s return with the ...
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2answers
86 views

Short Volatility [closed]

Being net short options is an obvious case of being short volatility. But what other investments are "functionally" short volatility? Is long equities long or short volatility? Is short Apple long or ...
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1answer
143 views

What are the parameters of the function PORTVAR in Matlab?

According to the Matlab help, Portvar will give the "Variance for portfolio of assets" by entering the returns of the Assets and the corresponding weight. However, it does not explain the parameters ...
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1answer
34 views

Transaction Costs Measure ATOP: What does it mean and exactly measure?

I went through some presentations about LowVol strategies for some indices. In the presentations were tables with average returns, vola, Sharp ratio and ATOP. I have no clue what this ATOP is supposed ...
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1answer
91 views

How do I track implied volatility of specific delta?

I'm a newbie with respects to volatility trading and options. I recently purchased a book on the topic called "Trading Implied Volatility -An introduction" by Simon Gleadall. It's been one of the most ...
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1answer
95 views

What math concepts are used in designing volatility models

What topics in statistics and mathematics do I need to understand thoroughly before I can start to dabble with stochastic volatility models and volatility arbitrage?
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1answer
51 views

Is the price of a binary call not monotonous with vol for OTM

Is this true and how would you prove it
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2answers
523 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 ...
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3answers
508 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
142 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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135 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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224 views

Black model - volatility estimation

In the Black (1976) model: We should use the settlement prices of the underlying futures contract in order to estimate the volatility, right? Or can we also use the spot prices? Because the ...
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3answers
2k views

How to calculate return rates with negative prices?

I'm dealing with electricity options and I'm considering the possibilty of negative prices. I want two estimate the historic volatility. However, an arithmetic mean doesn't feel appropriate and ...
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1answer
225 views

volatility Table and BS formula

assume I have implied FX volatility Delta-Term table from broker. I have time noticed as 2M, 3M. what do I have to put into BS formula, is it 2/12 or "count the business days"/"daycount basis"? I am ...
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2answers
47 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 ...
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1answer
27 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.
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1answer
31 views

volatility skew for lognormal model is flat?

Does anyone know why the volatility skew for lognormal model, such as BK, should be a flat line, meaning that implied black volatility for options will be same for those with different strike prices? ...
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1answer
141 views

Looking for a definition of financial entropy

In Science, Entropy is generally considered to be the irreversibility of stuff. Google defines entropy as: lack of order or predictability; gradual decline into disorder The 'gradual decline in ...
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1answer
97 views

Constant decreasing volatility, GARCH forecasting

I am trying to forecast the volatility using GARCH modelling in R. I fit an ARMA(1,1)-GARCH(1,1) model, but my sigma predictions are constantly decreasing. Anybody know why? ...
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2answers
100 views

I have portfolio volatility for individual years, can I use them to compute portfolio volatiltiy for subperiods?

Thanks for opening this question. I have constructed some rules for a portfolio with annual rebalancing and am backtesting it for the period 1990-2014. I want to compare the risk-adjusted return to ...
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2answers
96 views

Is the volatility for these two SDEs the same

$$ (1) \ \ d\left(\frac{1}{S_t}\right) =\frac{1}{S_t}\left(\sigma^2-r\right)dt +\frac{1}{S_t}\sigma dW_t $$ and $$ (2) \ \ dS_t = S_t rdt + \sigma S_t dW_t $$ How can you prove that?
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1answer
43 views

Normal vol - convention

apologies for the simplicity of the question, but I was wondering: what is the quoting convention for normal (bps) volatility? Say I have the following time series of data: Date Close Abs Change ...
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3answers
115 views

What makes investors risk averse?

There are some regularly-occuring events that coincide with a rise in the implied volatility of an asset. For example, in advance of an firm's annual earnings report, it is typically expensive to buy ...
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1answer
160 views

Constructing Volatility Smile from Implied Volatility & Delta

I have implied volatility data for call and put options (expiring in 1 month from any given date) for a particular stock. In addition, I have the delta for the options. However, I have no information ...
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1answer
146 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 ...