Questions tagged [implied]
The implied tag has no usage guidance.
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Calibration of Heston using implied vol as $v_0$
I am looking at the difference if you calibrated the heston from market data using objective function minimisation.
In scenario 1, I calibrate all the parameters from market data
In scenario 2, I ...
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Implied vs historical volatility in option pricing
I discussed recently with a trader who told me that put options are priced using historical vol, and call are priced using the implied one.
My guess would be that as the put option market is much more ...
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basic numerical integration question related to case of high positive volatility skew
is the below equation true irrespective of if that 2nd derivative turns out to be negative or >1 , (ie even if theres an arbitrage) ?
the reason i ask is that i am writing a single asset montecarlo ...
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How to measure accuracy of SABR volatility surfaces?
I would like to test how accurate are SABR volatility surfaces with respect to historical volatility over a given time period and for a specific equity index.
Reading a few papers I realised that one ...
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Implied Volatility Models
I am doing a research project and writing about volatility modeling. The three broad basis I am covering are Historical volatility, Implied volatility and stochastic volatility. It is my aim to code ...
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Plotting a CSA curve in QuantLib
IRS under a CSA
Let's consider an example of Interest Rate Swap under a CSA.
To calculate discount factors that can be used to discount cashflows in one currency, $C_{1}$, collateralized in another ...
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Black Standard Deviation in QuantLibXL
I was having a doubt about a fucntion in the QuantLib add-on for excel.
What is the formula for the function: qlBlackFormulaImpliedStdDev(...)
I know that there ...
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Dupire (Local Vol with Imp Vol)
I am trying to implement a local volatility pricer using Monte Carlo and Dupire's equation in function of implied volatilities and I was told that first of all I have to check Dupire is well ...
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What is IV really? Why does an option that is about to expire have such high IV for OTM options?
I was reading this definition: https://investorplace.com/2018/08/what-is-implied-volatility-concern-investors-invtlk/
If its IV stands at 20%, a movement of 20%, or $20 per share, over a 12-month ...
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using bid ask prices to imply bid ask volatilities
Let's say i have bid / ask feed of an option prices (across strikes and expiries, calls and puts), what is the accurate way of implying out vols from these bid / asks
For eg; to get the bid vol, ...
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Why my delta position is increasing with increase in spot?
I am trying to take position in future as per the delta position of short put. My strike is 13794 for short put option, spot 10305.3 and volatility is 20.153 then I am getting 5890 position to buy and ...
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Market implied rate
Today's 3m usd libor (US0003M) is 0.3625% and 6m usd libor (US0006M) is 0.5484%,
so from here, the implied 3m USD libor 3m forward is about 0.73%.
Today's EDU0 quote is 99.71 (implied 0.29% rate).
...
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Extrapolate Implied Volatility Surface
I have a moneynessratio-tenor volatility surface and want to extrapolate the implied volatility for moneynessratios > 150%.
The volatility surface was downloaded for different points in time, so I ...
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Implied repo rate calculation from Fabozzi
I'm looking at the chapter Implied repo rate in Fabozzi's Fixed Income Handbook.
There it is defined as the return received by going long the basis, i.e. buying the cash bond (financing it with the ...
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What is the connection between the risk neutral implied density and the real world density?
I understand that we can use option prices to imply volatilities and ultimately to imply a risk neutral density. I also understand that this implied density is not the same as the "real world density"....
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Implied interest rate using put-call parity
In the process of asking this question, I acutally found the solution. I still let this post open if it can be interesting to someone else and have added a related question at the end.
I want to ...
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How to quantify the Variance Risk Premium (VRP) with probability density functions?
The VRP is usually displayed by charts like this one:
It's easy to see that, for most of the time, options are priced by using volatility which will reveal itself larger than the realized one. So VRP ...
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CDS, default probability and bond price
When we calculate the implied default probabilities from CDS, can we use that information to price bonds?
I am getting familiar with Fixed Income. I saw textbooks using implied default probabilities ...
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How to calculate implied correlation via observed market price (Margrabe option)
I can't seem to figure out how to do the following: compute the implied correlation $ρ_{imp}$ by using the observed market price $M_{quote}$ of a Margrabe option, and solving the non-linear equation ...
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Inherent volatility of selling longterm options and buying short term options
A two-month option has an implied vol of 60%, the corresponding 2-year option has an implied vol of 34%. You buy the short terms and sell the long terms. What is the inherent volatility of the total ...
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Implied Equilibrium Returns Example
I've been trying to work through a simple example using A Step-by-Step Guide to the Black Litterman Model, but I'm having trouble understanding implied risk aversion.
Say I have two uncorrelated ...
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Implied AUD Interest Rate from USDAUD FX Swap and USD Interest Rate
Can someone help me understand how to derive the implied interest rate or spot rate in BBG FXFA?
I actually get why the Forward rate, F_Ask and F_Bid are derived using the formula in the picture.
...
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Can prediction of realized volatility for next day improve delta hedging (gamma scalping)?
Im quite confused. As I understand from standard delta PNL of option + underlying position, pnl is equals to difference between realized and implied vol weighted by gamma.
However, as I understood, ...
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Forward implied vol vs Instantaneous vol
In the Discrete Stochastic Implied Volatility Model which is from the standard Heston Model, the model shows the evolution of forward implied volatilities with time.
I thought forward implied ...
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Extrapolating implied dividend yield
I have liquid option quotes for 1, 2, 3 and 4y expiries. I was able to imply the continuous dividend yield for all of those. How would you extrapolate such implied yield to 5 and 6y expiries?
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Can I use implied volatility of stocks to predict the next days or weeks top 10 gainers and losers?
Is it true if I said that the stocks with the highest implied volatility for its options with just one day to expiration today will inadvertently be the stocks with the largest price movements on the ...
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What vol to use when implying strike from delta?
I have a set of implied vols in delta space and want to derive for each delta the corresponding strike. I understand the procedure, but I am not sure what implied vol I should use, whether this has to ...
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Why is Bachelier implied volatility more skewed than the Black-Scholes implied volatility?
I found the following explanation in a paper by Grunspan (see attached paper page 6) but have trouble understanding it:
By differentiating Formula (3) with respect to m, it turns out
that the ...
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Implied correlation
Have I understood it correctly if the standard way to calculate implied correlation is the Gaussian Copula model where we:
Calibrate the underlying portfolio to get a homogenous default probability ...
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EUR Implied Forward Rate from Bloomberg
does anyone know about the EUR Forward Implied 3 Month Rate published by Bloomberg on the Bloomberg Page EURI3M ?
First question: this is the rate from a forward curved, forward curve being ...
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ATM-implied volatility
I am trying to understand the methodology that researchers used to compute ATM-implied volatility with real data.
The problem is giving the discrete sets strike prices of one particular option with ...
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Confusion with volatility smiles implied by different models
I am reading a book "The concepts and practice of mathematical finance" by Mark Joshi. In Chapter 18 he discusses the shapes and dynamics of smiles under different models. I do not understand what is ...
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What does implied volatility means for different call and put strike prices?
Why there different implied volatility for different strike prices?, Can plz someone explain to me? I am pretty new to options. Thanks in advance
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How do they calculate stocks implied volatility?
I know the construction of Black-Scholes model and how do we solve it for an Implied Volatility. But in general, which option ...
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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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Connection between implied volatily and implied probability
I am reading some lecture notes about Black-Scholes (BS) option pricing. Since the BS-formula is not supported by observed data because of the dependence of the implied volatility on the strik and ...
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forward implied volatility skew
I would like to calculate implied forward volatility skew. I have stochastic volatility monte carlo. What kind of payoff do I need to price and how to use Black() formula to calculate the implied ...
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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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Implied probability density (Question 2 - Applications and Interpretation)
Using the second derivative of the Call-Option-Price one can try to recover the pricing density.
Formally: Assuming a constant interst rate $r$ and also not making any assumptions on the model ...
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Implied state price density (Question 1 - derivation of the formula)
I came upon the term "implied state price density" in a couple of papers.
As far as I understand the concept one basically tries to extract the "pricing density" from the market data.
For the sake ...
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