Stack Exchange Network

Stack Exchange network consists of 174 Q&A communities including Stack Overflow, the largest, most trusted online community for developers to learn, share their knowledge, and build their careers.

Visit Stack Exchange

Questions tagged [implied-volatility]

The volatility of the price of the underlying security that is implied by the market price of an option based on an option pricing model.

1
vote
2answers
76 views

Why do we need to calibrate vega?

I was going through some paid video on options. The tutor in the video asked the following question: Person $A$ has the following portfolio at the start of April Portfolio of options with vega $20,...
0
votes
0answers
36 views

SABR ATM volatility

The ATM implied volatility is important in SABR when calibrating the model. Let's consider the ATM vol (for a european call option): $$\sigma = \frac{\alpha}{f^{1-\beta}} \left[ 1+ \left(\frac{(1-\...
1
vote
2answers
96 views

Are there methods of calculating Implied Volatility in the stock market, other than Black-Scholes?

(I've gone through many questions/posts on quant StackExchange and only find responses about Black-Scholes)
-1
votes
0answers
23 views

How to get stock future price distribution based on implied vol surface [duplicate]

Supposed on today, we have spot price, interest rate, dividend rate, and the implied vol surface? How to get the future stock price distribution? Like one year after. We cannot use implied vol ...
0
votes
0answers
35 views

Calculating the implied density from the volatility smile

Suppose I have a volatility smile for a certain underlying at a given maturity. This implies a certain density for the underlying at that maturity, which can be explicitly computed, via a corollary to ...
1
vote
2answers
135 views

Interest rates forward implied volatility models

I'm trying to find out which model to use to price a pur forward volatility product named VolBond marketed by structuring desks currently. Let me introduce the products first: Example 1: You pay 100 ...
0
votes
0answers
28 views

Estimating/Rule of thumb for volatility skew from daily returns? Simple example?

Let's say I have a stock with very limited information, I have 5 days (1 weeks) of returns. It moved 0% for 4 days, and then 10% on the 5th. Let's say I assume the stock will move in a similar fashion ...
6
votes
1answer
120 views

Different versions of sticky strike, moneyness and delta

I head a lot of versions of those three concepts: sticky strike, sticky moneyness and ...
1
vote
0answers
58 views

Probability of Implied Volatility Move [closed]

I want to see the probability of Implied Volatility of an underlying moving up or down from its current position. Would it just be 50% probability of going up and 50% of it going down? Because I've ...
0
votes
0answers
35 views

What is price level dependence of volatility

I am trying to understand the term level dependence of volatility as mentioned in Pricing of options on assets with level dependent stochastic volatility. Is this same as leverage effect mentioned in ...
6
votes
2answers
161 views

Vega of exotic options

I'am wondering if there is a standard definition to the Vega of an exotic product when the underlying model is not Black-Scholes. Let me give some examples : What is the Vega if the price is ...
4
votes
3answers
342 views

Forward implied volatility

Can one price accurately by only using vanilla options a derivative that is exposed/sensitive mainly to the forward volatility ? Here are some examples : a) In equity markets : ...
0
votes
0answers
40 views

Calculating daily underlying move from options volatility?

My broker has provided a risk report that shows our options book shocked at various standard deviation moves of the underlying. Their report has the future at $66.64, ATM Vol at 23.74% with 2 days ...
0
votes
2answers
122 views

What is the difference between forward volatility swap and FVA?

Specifically looking at FX but i guess it's a general question. any good reference would be appreciated. FVAs are not mentioned in Derman's paper ("More than you ever wanted to Know about volatility ...
1
vote
0answers
45 views

Effect of Volatility Regime on Volatility Smile

For short-term FX options, I find empirically that the degree of curvature of the smile (OTM/ATM in %) is higher in low volatility environments. Similar results are found by Pena et al. ("Why do we ...
3
votes
1answer
82 views

Estimating at-the-money volatility where at-the-money option is absent from the market

I am trying to estimate the intraday ATM volatility in a market where the the strike prices are relatively sparse thus the ATM option may not exist (let's say the closest strike is about 2% away from ...
2
votes
1answer
49 views

Literature on quoting vol surfaces in the absence of listed option prices [duplicate]

What are some of the modern methods used to price equity volatilities "the most accurately possible" when there are very few listed derivative prices available or even none at all? Do the pricers in ...
0
votes
0answers
56 views

Implied Volatility of a call plus its delta

I would like to understand if exists a smart way to imply the volatility from a quote that is the sum of a call and its delta: is there any method other than simple iterative minimization?
0
votes
2answers
120 views

How should I convert FX Volatility Surface from one base currency to another?

This might be a very simple question but I wanted to understand how to convert FX volatility surface points which are quoted in one base currency to another currency? Eg I have fx vol quoted in EUR ...
1
vote
1answer
53 views

SPX Convexity Spread

In this report on volatility from BNP Paribas, https://globalmarkets.bnpparibas.com/r/Volatility_Express_20171128.pdf?t=BG3REXwMP3NZJRN7wY5Vt&stream=true it states on Page 10 that the SPX ...
5
votes
1answer
138 views

Comparing historical to implied volatility

As title states, I am trying to compare historical to implied volatility of a stock. I approximate the single implied volatility (30 days forward) of the stock by first finding 2 series that ...
1
vote
0answers
42 views

Vega with SVI Gatheral bumps

How would one go about computing a vega profile of an exotic derivative where the volatility surface is modeled using Gatheral's SVI parameterization? In particular, I am thinking about bumping each ...
2
votes
1answer
135 views

CMS spread vanilla options quotation

How are vanilla (call/put) options on CMS spread quoted on the markets ? Through an implied (normal/lognormal) volatility with a normal/lognormal model on the spread in the forward measure ?
0
votes
1answer
104 views

Forward Skew in the Local Volatility Model

How does the local volatility model cause a forward skew? How is this different to the skew observed for future tenors in the vol surface?# Also how do LV models underestimate vol of vol?
2
votes
1answer
61 views

Implied volatility of inverse quote

Suppose I have a quote of INR/USD and the implied vol surface is also given. Is it theoritically correct to use to same implied vol for analysis of the inverse quote, i.e. USD/INR. Correct me if I am ...
0
votes
0answers
42 views

calculating implied volatility of Asian Option

I am new to the site. I saw another similar question but I can't comment on it because of low rep. I wanted to know how the volatility of an Asian is calculated. I was thinking that a weighted ...
0
votes
1answer
69 views

Difference in exposure between delta hedged options, ATM straddles and delta hedged straddles

What is the difference in exposures between delta hedged options, ATM straddles and delta hedged straddles. They all seem to provide the same thing, which is exposure to volatility. What are the ...
2
votes
2answers
154 views

High-frequency historical IV data

Where can I buy historical IV data for specific individual stocks on specific days calculated at least once-per-min (preferably once-per-second)?
4
votes
2answers
734 views

Gamma Pnl vs Vega Pnl

Why does Gamma Pnl have exposure to realised volatility, but Vega Pnl only has exposure to implied volatility? I am confused as to why gamma pnl is affected (more) by IV and why vega pnl isnt affected ...
0
votes
1answer
175 views

Value of Call Option as Volatility goes to Infinity

Why would the value of a call option go infinity as volatility goes to infinity? I understand how you could solve this question by taking $\sigma \rightarrow \infty$ in the solution to the black ...
5
votes
2answers
361 views

Autocallable pricing under stochastic vs. local volatility

I am interest in the reason why an Autocallable (structured product) is cheaper under local volatility compared to stochastic volatility. I thought this was due to the following: when thinking in ...
0
votes
0answers
45 views

Anomaly detection in volatility skews / term structure

I'm currently working on some algorithms to help the risks team detect anomalies in the volatilities of equities that are pushed every day in the systems. I quickly thought about using clustering ...
0
votes
0answers
41 views

What methods are there for parametrizing a volatility surface?

As the title says, what methods exists for parametrizing a volatility surface. More in detail, if i have a matrix of implied volatilitys based on time and strike price, obtained from the Black-Scholes ...
1
vote
0answers
49 views

Local variance derivation by Gatheral

I've bought Gatheral's book on Local Volatility and I have troubles with understanding a part where he shows that local variance is a conditional expectation of instantaneous variance. Why in the ...
3
votes
1answer
132 views

Proof for ATM delta with Local col

I am looking at a time-homogeneous local volatility model where ATM implied volatility equals ATM local volatility: $\sigma_{imp}(S_0)=\sigma_{local}(S_0)$ ATM IV Skew = half of LV slope In general $\...
6
votes
1answer
173 views

SSR definition in Bergomi in relation to sticky strike and sticky delta

In Bergomi [Stochastic Vol Modelling] (Sec. 2.5.2), in the section on surface dynamics, the following definition of the "Skew Stickiness Ratio" (SSR) is made: $$ SSR = \dfrac{1}{\mathcal{S}_T}\frac{d\...
7
votes
1answer
169 views

Jim Gatheral's assertion on ATM implied volatility vs. square root variance

In Jim Gatheral's book The Volatility Surface Section Dependence on Skew and Curvature on page 138, he asserts that We know that the implied volatility of an at-the-money forward option in the ...
3
votes
1answer
178 views

MTM Hedging Performance of Vanna-Volga

I was wondering how well Vanna-Volga (VV) Implied Vols "perform". So I experimented with the following option parameters $$S_0=100,\ K=92,\ r=0.03,\ q=0.01,\ T=2$$ and VV parameters $$K_1,K_2,K_3=...
2
votes
0answers
155 views

Implied Vol skew VS Local Vol skew (as presented by Derman 1995)

I am reading Derman's article/notes regarding local volatilty: http://www.emanuelderman.com/writing/entry/the-local-volatility-surface. I am examining the graph on page 13. The Implied volatility (...
2
votes
1answer
202 views

Obtaining swaption prices from lognormal volatility quotes

I am working with the following dataset from quandl: https://www.quandl.com/databases/CSWO (I'm using the sample dataset only). My question is how to obtain the swaption prices from the quotes given. ...
0
votes
1answer
38 views

Which volatility input for in-arrear convexity correction?

When pricing a Libor-in-arrear swap, I am using the following formula (for the cashflow covering the period $[T_{i-1}, T_i]$, ie. paid at $T_i$ and resetting at $T_i$): $V(t) = P(t,T_i)F(t;T_i,T_{i+1}...
1
vote
2answers
280 views

Marking implied vol surface daily with sticky strike and sticky delta

Suppose that implied vol surfaces are calibrated once per month due to data restrictions (i.e. option data is only available at month end). How can a trading desk remark their vol surfaces on a daily ...
2
votes
0answers
63 views

American options — doing better than Black's approximation when $r = 0$

I am trying to find the implied volatility smile for an American call option with a known dividend during the option tenor. For the sake of argument, let's say today is Jan 1, the dividend $D$ is paid ...
1
vote
0answers
46 views

Implied Volatility of cross currency pairs

Been looking for this... Is there any way we can infer directly, say GBP-JPY's 1-year volatility from GBP-USD's and USD-JPY's? Many thanks.
0
votes
0answers
41 views

Why has the Bachelier implied volatility an elevated curvature than the BS implied volatility?

Why has the Bachelier implied volatility an elevated curvature, i.e. is more skewed, than the BS implied volatility? Thanks a lot! Lisa
1
vote
0answers
76 views

Research topic on volatility

Currently studying about volatility, VIX and implied volatility as well as option pricing via stochastic volatility models. My question is how these are used in real life except of speculation. Do ...
2
votes
2answers
137 views

Flaw in the following argument with Binary Options and Skew

A Binary option is ATM and expires tomorrow. If the skew of the vanilla options steepens (left side up, right side down) what happens to the price of the Binary Option. I know that using a ...
1
vote
0answers
45 views

Why hasn't SVXY recouped more of its lost value as vol has crashed in the past 2 weeks?

SVXY fell from around \$140 to \$9. It has since bounced back 25% to around \$12. Vix futures went from the 11-14 range to 35 and now back to 17-18. SVXY holds a short position in Vix futures with ...
1
vote
2answers
97 views

Nature of short VIX strategies

By now, we all pretty much know that the recent upsurge in the VIX Index caused the spectacular failure of some Exchange-Traded Products (ETPs) or Exchange-Traded Notes (ETNs) written on it. An ...
1
vote
1answer
78 views

Rebasing of Cap Volatilities

I recently found this article where towards the end the author describes a method to rebase cap volatilities. Their method works like this: for a fixed strike assume that you are given the implied ...