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

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177 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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35 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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95 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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97 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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52 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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660 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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163 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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141 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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228 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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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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232 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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38 views

When is option value inversely related to expected volatility?

It is common knowledge that the greater the expected value, the higher the option value. However, there are surely exceptions, as written by Paul Wilmott's FAQs in Quantitative Finance Q: If you ...
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52 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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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.
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42 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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152 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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117 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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107 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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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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46 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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117 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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173 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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149 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 ...
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299 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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542 views

How to compute a sector's volatility within a portfolio?

Assume I have a large portfolio of equities spread across three sectors. I am attempting to compute the volatility of these sectors within the portfolio considering the cross correlations among the ...
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28 views

Estimate Option Price Given X% Move N Days in the Future

I was wondering if someone could recommend a method to estimate the price of an option N days from now given an X% move in the underlying. I have fitted a volatility surface but where I am running ...
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41 views

Volatility of Portfolio

Let's consider a stock whose price follows $$ \frac{dS(t)}{S(t)} = \sigma dW(t) $$ along with a cash account $M \equiv 1$. Let's say I have \$1 to invest in these assets and I may not short either ...
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36 views

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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40 views

How is the formula for the VEV (VaR-equivalent volatility) in the PRIIP document derived?

The recent regulation (page 32) on PRIIPs requires to compute a VaR-equivalent volatility defined as $$\mbox{VEV}=\frac{\sqrt{3.842-2\ln \mbox{VaR}}-1.96}{\sqrt{T}}$$ Does anyone have an idea how ...
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13 views

Do smaller horizons better estimate volatility for longer horizons than the longer horizons?

Suppose you want an estimate of the 20 day return variance. You could grab historical lagging 20 day windows to build an estimate, or you could build 10 day lagging windows (twice as many data points) ...
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52 views

Easy question (?) - how to measure if volatility for two samples is significantly different?

For my bachelor thesis I'm doing a research where at one point I want to measure if volatility for a certain sample of stocks in period A is significantly different from i) the same sample of stocks ...
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47 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 $\delta$ ...
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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 ...
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30 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 ...
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41 views

Impulse response function interpretation

I would need a quick help with Impulse response function interpretation which I have done after Vector autoregression model in stata. I need to understand how to interpret IRF graph or table values ...
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68 views

pricing with implied volatility surface

I am a newbee in Quantive finance. supposing I calibrate a smoothing implied volatility surface with cubic spline now. A minute later I want to price K=100,t=1 option, can I just find the point on ...
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56 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 ...
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35 views

Lambda in RiskMetrics for fixed income

What is the default lambda proposed in RiskMetrics for fixed income?
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33 views

Integrated Volatility in Diffusion Processes vs Volatility of Discrete Processes

In a Diffusion Process of the form $$dX_t = \mu(X_t)dt + \sigma(X_t)dW_t $$ the Integrated Volatility is defined as $$IV_t = \int_t^{t+1} \sigma^2(X_s)ds.$$ In this case, the Integrated Volatilty ...
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66 views

Interpreting and scaling of Realized Variance with sample data

I have some question about realized variance(RV) and I have some sample prices below to work with. You can run the R code below to build a vector of log returns. Three are 78 5-minute buckets in a ...
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49 views

Estimate volatility in forecast

I have a model with a rolling forecast. In each time step $t$, I predict the price for the next periods, e.g. $\hat{p}(t, t+1)$ and $\hat{p}(t, t+2)$. If I start in $t=0$ and arrive at $t=2$, I ...
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26 views

Return volatility or Price Volatility [duplicate]

Which is a better method to calculate volatility - Price variance or return variace or is it subjective to the use of volatility figure?
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51 views

Realized Volatility: errors correlation

When using Realized Volatility (sum of squared intraday returns) to estimate volatility, following the model: $$r_t = \sigma_t \epsilon_t $$ where $\sigma^2_t$ is the volatility at time $t$ and ...
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80 views

Volume or Volatility?

I've recently been given a project which came with some documentation. In this documentation is a bullet point that reads: Liquidity Risk in Equity, Credit and Vol I'm unsure as to whether vol is ...
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147 views

Comparing Portfolio Volatility with Index Volatility seems a wrong method?

thanks for looking into this question. I am comparing an investment strategy against the S&P 500 for a financial article I'm writing. I compute volatility of the Portfolio in this way, as the ...
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99 views

I have volatility of a portfolio in year 1 and in year 2. How do I calculate the volatility over the total 2-year period?

thanks for looking into this question. See the picture below (better is right-mousebutton - open in new tab). I also have the price and return data of the Stocks if that's needed to calculate the ...
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109 views

Fixed volatility portfolio with max returns creates skewed results

I am trying to create a portfolio of only four components using the mean-variance optimization (MVO). I am setting up my problem such that I want to maximize the expected returns with a fixed vol ...
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38 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?
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458 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 ...
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115 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 ...