Timeline for Forward implied volatility
Current License: CC BY-SA 4.0
22 events
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| Jun 14, 2019 at 21:55 | history | edited | Jiem | CC BY-SA 4.0 |
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| Jun 12, 2019 at 19:17 | history | edited | Jiem | CC BY-SA 4.0 |
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| Dec 8, 2018 at 19:00 | history | edited | Jiem | CC BY-SA 4.0 |
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| Jul 28, 2018 at 11:11 | history | edited | Jiem | CC BY-SA 4.0 |
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| Jul 26, 2018 at 21:00 | history | tweeted | twitter.com/StackQuant/status/1022587360893198336 | ||
| Jul 26, 2018 at 8:21 | answer | added | Quantuple | timeline score: 14 | |
| Jul 24, 2018 at 21:27 | comment | added | Quantuple | Glad this helped, I will turn it into an answer tomorrow. Concerning straddles these are European instruments, so a calendar spread of straddles would be similar to a calendar spread of variance swaps IMO. Caveat: the thing I said in my comments (e.g. variance swaps price for a maturity T are determined once all the European vanilla prices for all strikes at this maturity are matched = the unconditional risk neutral PDF is known via Breeden-Litzenberg identity) is only true when considering pure diffusions. With jumps variance swaps become "exotics" as well. | |
| Jul 24, 2018 at 20:36 | comment | added | Jiem | @Quantuple,Your answer is compelling. It's cristal clear to me now. It worth being recorded as an answer not only a comment. do you think ? Do you have an idea to how to answer the second part on straddle calendar spread ? I would say that is a product sensitive tn forward vol but as a second order. as the important sensitivities are spot vol vega and maybe gamma and delta. | |
| Jul 24, 2018 at 10:56 | comment | added | Quantuple | ... I would recommend reading Bergomi's excellent book "Stochastic volatility modeling". In LSV the idea is that the local volatility part guarantees that you match the vanilla prices (hence fixed unconditional distribution) and the SV part is tuned so as to achieve comfortable break-even levels on Volga and Vanna risks. The Volga risk in particular is the one which is important when considering forward starts, which he discusses in his book. | |
| Jul 24, 2018 at 10:54 | comment | added | Quantuple | Hi @Jihem. Here's my two cents. Forward variance swaps can be expressed as calendar spreads of variance swaps. Variance swaps are unequivocally determined once the unconditional risk-neutral PDF is determined i.e. the vanilla option prices are matched. So a SV and a LV model both perfectly calibrated to the vanilla market will yield the same (forward) VS prices. Forward start options on the other hand depend on conditional distributions: an information which is simply not encoded in the vanilla market. So this remains a degree of freedom of sorts... | |
| Jul 23, 2018 at 13:44 | history | edited | Jiem | CC BY-SA 4.0 |
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| Jul 23, 2018 at 9:33 | history | edited | LocalVolatility | CC BY-SA 4.0 |
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| Jul 23, 2018 at 6:02 | history | edited | Jiem |
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| Jul 23, 2018 at 5:45 | history | edited | Jiem | CC BY-SA 4.0 |
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| Jul 22, 2018 at 23:44 | answer | added | dm63 | timeline score: 5 | |
| Jul 22, 2018 at 21:36 | history | edited | Jiem | CC BY-SA 4.0 |
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| Jul 22, 2018 at 19:19 | answer | added | Attack68♦ | timeline score: 8 | |
| Jul 22, 2018 at 19:18 | history | edited | Attack68♦ | CC BY-SA 4.0 |
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| Jul 22, 2018 at 17:38 | comment | added | Jiem | Thank for the comment. I have precised in the question what i mean by calculating. Regarding "having position on" or "having exposure to" let say "the price is mostly sensitive to and mostly driven by" | |
| Jul 22, 2018 at 17:37 | history | edited | Jiem | CC BY-SA 4.0 |
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| Jul 22, 2018 at 17:11 | comment | added | Attack68♦ | Calculating the mid-price of forward vol and gaining exposure to it - and only it - in a practical sense are two different things. Personally I would appreciate it if you clarified your question to specify exposure or pricing, and actually outlined what you specifically wanted to calculate with which prices. At least if you were interested in trading the vol I would expect you to be trading straddles rather than calls. | |
| Jul 22, 2018 at 15:34 | history | asked | Jiem | CC BY-SA 4.0 |