Questions tagged [implied]

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Model-Free Option Pricing

From Breeden and Litzenberger (1978) and subsequent work, we may find the risk-neutral density $q_{S_T}$ of $S_T$ from European option prices - assuming there are enough traded options (e.g. SPX) via ...
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0answers
226 views

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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0answers
230 views

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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1answer
58 views

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, ...
1
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0answers
151 views

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, ...
1
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0answers
289 views

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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1k views

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 ...
0
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0answers
26 views

Implied Market Equilibrium Returns vs. Realized Returns

Can somebody please explain to me the validity of using Market Implied Returns? I am implementing the Black-Litterman Model which begins with the Excess Market Equilibrium Returns calculated as: ...
0
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1answer
155 views

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 ...
0
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1answer
68 views

FX implied yield

Emerging market currencies like IDR, INR, its fx implied yield generally rise in a stressed environment. While for KRW, fx implied yield usually drops in a stress environment. I would assume KRW ...