Linked Questions

20 votes
3 answers
14k views

What causes the call and put volatility surface to differ?

I currently have a local volatility model that uses the standard Black Scholes assumptions. When calculating the volatility surface, what causes the difference between the call volatility surface, ...
Jeffrey's user avatar
  • 203
11 votes
4 answers
5k views

Implied Vol Smile: from Calls, Puts or Both?

This might be a simple question, but I couldn't find the answer anywhere: is there a separate Volatility smile (and surface) based on Calls and a separate Volatility smile (surface) based on Puts? Or ...
Jan Stuller's user avatar
  • 6,178
7 votes
4 answers
2k views

What is meant by the funding cost of a derivative?

Numerous sources refer to the 'funding cost' of a derivative. I'm confused as to exactly what cost is being referred to here. To illustrate my confusion, consider purchasing an uncollateralised OTC ...
Trent Di's user avatar
  • 125
2 votes
2 answers
3k views

Where can I find caplet implied volatility data?

I am looking for caplet implied volatility data for Libor-EUR. Is there any online data base etc. available to get such data? Does ...
Brian Smith's user avatar
2 votes
1 answer
2k views

Option Pricing for Illiquid case

I am currently studying crypto options trading and have observed that there is often a lack of liquidity for options (such as BTC Options) on various exchanges, including Binance. In many cases, there ...
Starlord22's user avatar
3 votes
1 answer
913 views

How does a volatility surface based on moneyness instead of strike stay consistent with put-call parity?

By definition due to put-call parity the implied volatility will be the same for puts and calls with the same strike price and time to maturity. Meanwhile, a volatility surface is often quoted in ...
Oscar's user avatar
  • 902
3 votes
2 answers
297 views

Different Exercise Style Options on Same Underlying

Some equities on European markets have options traded in two different exercise styles: American and European. Examples: ABB and ABB (european) on Eurex Banco Santander on MEFF Consider ...
Eli's user avatar
  • 986
0 votes
1 answer
496 views

Risk free rate for Black and Scholes model: Incorporating inflation?

I am new to quantitative finance and I am trying to create a model for option pricing. Naturally the Black and Scholes equation is front and center for this sort of thing, but that raises the question ...
SSC Fan's user avatar
  • 53
3 votes
4 answers
440 views

What's wrong with calibrating implied volatilities with polynomials?

People use different parameterization schemes to fit the implied volatilities from the market, e.g., SVI. But often times they cannot always fit well, e.g., the "W"-shape before earnings, ...
Michael's user avatar
  • 301
1 vote
1 answer
534 views

Python - yahoo finance options data - volatility smile plot

I have plotted the IV of TSLA options using yahoo options data, but the scatter plot doesn't look right, can anyone advise why the plot looks like this? I would expect to see a vol smile plotted. EDIT ...
Skittles's user avatar
  • 145
0 votes
2 answers
174 views

implied volatility for close to expiry ATM options vs VIX

All throughout my MFE I was told that implied volatility for close to expiry ATM options is a reasonable estimate for current volatility and tracks realised vol pretty well. Then why does VIX measure ...
THATS MY QUANT MY QUANTITATIVE's user avatar
0 votes
0 answers
131 views

How do I calculate the implied dividend yield and/or the forward rate for an equity ETF?

I am interested in building an implied volatility surface for a given ETF given a set of option prices for several combinations of (call/put,strike,expiry). I am interested in different ways to arrive ...
quantypythonshow's user avatar
1 vote
0 answers
93 views

Vol Smile Call/Put Wing calibration

Is call/put wing volatility smile calibration approach used in practice? To calibrate an index (SPY) using only more liquid OTM calls/puts, to kind of use an "if" condition on K to S0 to ...
Skittles's user avatar
  • 145
0 votes
0 answers
93 views

Why do we use OTM options to extract implied vol?

It is often common practice to calculate implied volatility using puts for low strikes and calls for high strikes, so to always employ out-of-the-money options. Why is this often preferred to using ...
Mr Frog's user avatar
  • 253
0 votes
0 answers
95 views

Volatility Surface Modelling in Python

For my master thesis, I try to create a Volatility Surface for S&P500 Index options. Every time I run my code, the surface I get is full of spikes. I'm just not sure if these are outliers which ...
Aaron 's user avatar

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