Questions tagged [volatility]
A measure of the variation in price over time. Also a measure of the risk of a financial instrument.
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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 ...
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35 views
QuantlibXL - How can I define a volatility surface using moneyness instate of strikes?
I wonder if in the function qlBlackVarianceSurface() I can replace the strikes for moneyness and then price the option using the spot = 100% and the option strike = Original_Strike / Original_Spot.
...
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120 views
Contribution to Mahalanobis Distance
I am using Mahalanobis Distance to measure abnormal behavior within a portfolio consisting of a handful of general asset types, and am trying to figure out how to decompose this measurement into ...
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37 views
Delta hedge analysis - volatility rapidly growing
I'm working with a hedge expirement design, where I daily hedge with EGARCH(1,1) forecasted volatilty based on a moving evaluation of the past 126 days.
However, I can't seem to understand the profit ...
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1answer
87 views
Free Arbitrage conditions in ATM swaption surfaces
I'm wondering how can we check free arbitrage conditions in ATM swaptions surfaces since we only have access to Expiry, Tenor and volatility?
Can someone help me please, i didn't find any article ...
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23 views
Perfect in-sample size for out-sampling volatility prediction (EGARCH(1,1)
I have a few questions regarding in-sample size for volatility forecasting in EGARCH(1,1). I'm currently sitting with a dataset consisting of 1387 trading days of the S&P-500 index. I would like ...
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1answer
176 views
Realized Variance (realized volatility)
I'm confused about realized variance. I roughly know the theory around Ito Calculus and quadratic variation and integrated volatility so I understand what realized variance measures (even though as ...
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28 views
How to estimate lambda from NAGARCH submodel in R
I am trying to estimate the model="fGARCH", submodel="NAGARCH" from the rugarch package in R.
However, when I am estimating the parameters, only omega, alpha, beta and gamma are ...
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60 views
Intraday volatility pattern of Emini
I have the series of 1-min logarithmic returns of Emini future from 2007 to 2020
I calculated the standard deviation of each return at a fixed time of day and then I plotted the results (see image).
I ...
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29 views
Calculating E^2[σ^2] where σ is a GARCH(1,1) Proces
Given that α =0,113079 β = 0,873884 ω = 0,0000081
Need the calculate a call price using garch volatility I alsa calculated the kurtosis = 235 enter image description here:
https://www.researchgate.net/...
3
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1answer
224 views
Market price versus theoretical price of varswaps
When I traded varswaps several years ago, for some indices there was a significant mismatch between market price and theoretical price.
The theoretical price assumes continuous monitoring and infinite ...
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30 views
Realized volatility calculations from real dataset
I am working with a dataset from: http://web.math.ku.dk/~rolf/Svend/
named data 1.
I'm currently setting up a delta hedge for periods of 3 months. So currently we are starting at the start data of the ...
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78 views
Skewness and Kurtosis in GARCH vs Heston
GARCH(1,1)
In discrete time, we can model returns as follows
\begin{align}
r_t &= \mu + \sigma_t\epsilon_t\\
\sigma_t^2 &= \omega + \alpha \epsilon_{t-1}^2 + \beta\sigma_{t-1}^2
\end{align}
...
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1answer
132 views
The most appropriate volatility model
Which would be the most appropriate models to find volatility trading opportunities (i.e. plot a theoretical volatility smile I can rely on) for the following instruments:
Options on equity
Options ...
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30 views
In Pairs Trading: How can high volatility in spreads be explained when there is a market shock?
In my project I tested a Pairs trading strategy in the US equity market for data of 10 years. These 10 years include the financial crisis (2007-2008).
The strategy follows a Cointegration approach.
...
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2answers
93 views
looking for recommendation for a var/vol swap trading book
I am aware this book - volatility trading by Euan Sinclair, and it's nice book. But I am looking for book focus on var/vol swap trading, i.e., introduce about trading strategy/ideas by using var/vol ...
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1answer
94 views
Reconciling Two Claims About Volatility Under Fat Tails
I have read the Wikipedia article on volatility, and Nassim N. Taleb's Incerto, and found two statements attributed to Mandelbrot's views, which appear to be in contradiction.
Taleb (who was mentored ...
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1answer
56 views
High Beta, low specific risk, and no leverage?
My risk model shows a Beta of 2 for the stock APTIV (maker of car components). The model looks at the past 3 years with no decay.
Total vol is high but specific vol is very low. Typically when this ...
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93 views
How skewed are FX returns? Does this look like a plausible histogram of EURUSD?
I'm reading about volatility. I've charted the histogram of EURUSD and I am wondering if this looks plausible? What I've charted are the 1-hour percent change returns (not log returns). I've removed 0 ...
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79 views
Correct terminology - estimate or model?
I am doing some academic work and I'd like to summarise the picture around volatility models. As such, I'd like to refer to several ways of estimating volatility and I'd like to use proper terminology....
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43 views
Volatility for options pricing: fixed window or match maturity?
When calculating the volatility or covariance matrix of stock returns for the purpose of pricing a vanilla option on an underlying, it is difficult to choose the window over which the volatility ...
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72 views
Understanding GARCH
I asked this on stats.stackexchange but I realized this might be a better place to ask this question.
I am new to finance and volatility forecasting and am trying to understand how garch model works. ...
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188 views
Implementing a Variance Swap Hedging in R
I am trying to compute a hedge for a variance swap, in a simulation. Fo that I am using the following equation:\begin{align*}
E^Q\bigg(\sum_{i=1}^n \bigg(\frac{S_{t_{i}}-S_{t_{i-1}}}{S_{t_{i-1}}}\bigg)...
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1answer
124 views
forward variances under rough bergomi
I have seen in several papers on rough volatility using the following expression for the forward variances
$$ d\xi_t(u) = \xi_t(u) \eta \sqrt{2H} (u-t)^{H-1/2}dW_t $$
Can anyone explain to me how this ...
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26 views
How does one obtain a realistic range for the VIX using its volatility if it is at its multi-year low?
Suppose the VIX index is at a hypothetical multi-year low of 15, yet the volatility of VIX has a reading of 100. If one were to surmise from this volatility of VIX a range for the VIX over the coming ...
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33 views
The put-call parity have to be fulfilled by an asian option
Coming from here: https://quant.stackexchange.com/a/7616/43679 we have that for a European option, and due to the put-call parity, due to the non arbitrage rule, the volatility for a put and a call ...
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1answer
68 views
VaR using normal vol vS lognormal
We are using a vendor's software to calculate the Parametric VaR (using RiskMetrics approach) that take as input the volatility figure of the risk factors. The volatility used so far was the lognormal....
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20 views
Adjusting derived volatiles using skew
Once we obtain a prediction for the future volatility using (GARCH, HARQ, etc), do we have to adjust the implied volatility dependent on the strike price. How would we incorporate a skew versus a ...
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56 views
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 ...
6
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1answer
158 views
Negative Density in Local Stochastic Volatility (LSV) Model Calibration
I'm trying to calibrate Local stochastic volatility model using finite difference method, and I'm mainly following this referece: Tian (2015).
I met a problem when calibrating leverage function - the ...
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1answer
78 views
Converting Historical Volatility to Implied Move
I am trying to calculate an implied one-day move value for an instrument given its historical volatility. While I am familiar with this formula for implied volatility to implied move:
and intuition ...
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100 views
How to properly annualize portfolio volatility
I have a portfolio consisting of several assets and I'm using daily data to calculate various portfolio metrics, including historical returns and volatility. In order to compare portfolio performance ...
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1answer
46 views
Multiple Indices for CAPM model [closed]
I am new to quantitative finance so, please excuse me if the terms are not correct.
I am trying to apply CAPM on a portfolio which has multiple indices (S&P 500, Russel 1000 and S&P Financials)...
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22 views
open-close intraday demeaned log return calculation
open-close return is basically what I feed into the realized kernel volatility and recently I noticed the realized kernel covariance/variance is generating negative value so I had to retrace my ...
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1answer
76 views
annualized vs annual returns
For the purposes of MPT, to compute return of an asset, one typically uses the daily log return of the assets and then anualizes it and the same goes for stddev
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50 views
Log Moneyness vs Log Strike
In How to calibrate a volatility surface using SVI, is said: "(log-moneyness would be more accurate) ".
First, why do we talk about "moneyness", is it a reference of "being in ...
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48 views
weekly returns and the daily returns scaled to weekly
I am new in this blog and first of all I want to apologise for my english.
I have to calculate, for a university project, the weekly returns and daily scaled returns to weekly for few stocks
For ...
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1answer
52 views
Sub-portfolio correlation
I am trying to reduce correlation matrices into sub portfolios.
For example, I have a covariance matrix $\Sigma$ and weight-vector $w$ of two line items which I blend together into a sub-portfolio $\...
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31 views
does anybody know a package for the estimation in python of multivariate garch model? [duplicate]
is there any package in python for the estimation of multivariate garch models? (bekk, dcc)
i tried with the package mgarch but it provides only a few commands and wanted to know if there are some ...
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102 views
Rebonatos's formula in C++
I'm trying to code in C++ Rebonato's formula for swaption volatilities
$$ v_{\alpha,\beta}^2=\frac{1}{T_\alpha} \sum_{i,j=\alpha+1}^{\beta} \frac{w_i(0)w_j(0)F_i(0)F_j(0)}{S_{\alpha\beta}^2(0)}\rho_{i,...
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1answer
47 views
Is scaling the standard deviations in the VaR formula (parametric) equivalent to scaling the VaR figure at the end?
I have come across people calculating parametric VaR who scaled the standard deviations by say square root of 10 to scale up to a 10 day horizon.
Elsewhere I have seen textbooks suggesting that it is ...
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2answers
101 views
How does trndbot generate buy/sell signals?
I was looking at trndbot and it's buy/sell signals are pretty good - what algorithm are they using to generate these signals? Although it maybe similar to bollinger bands, it algorithmically ...
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1answer
98 views
Is there a HAR that deals with the leverage effect?
The EGARCH is a special GARCH model that treats the leverage effect of the volatility. The HARV does not make a distinction between negative and positive returns. Is there a special HARV that deals ...
2
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1answer
101 views
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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65 views
Forecasting returns and volatility using ARIMA-GARCH model in R
I am using rugarch package in R to forecast returns and volatility of a stock. I train an ARIMA (p ,d q) + GARCH(s, r) model on ...
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62 views
How to annualise hourly returns?
I have hourly open,high,low,close candles data for a particular asset. I wrote my own algo and some back testing code that replays the data from the past hourly candles to calculate the total return ...
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1answer
142 views
Stochastic Volatility vs Vanna-Volga
I'm working on the calibration of the Heston Stochastic Volatility Model for some FX option data for my bachelor thesis and I was asked "Why should people use Heston instead of other simple ...
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1answer
63 views
Short the difference between implied volatility and realized volatility of SPX
A professional trader said that the way is not to short VIX or other volatility products, but to
short the difference between implied volatility and realized volatility of SPX
This has to do with VRP ...
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59 views
Swaption extrapolation
I have some ATM swaption volatilities with the following characteristics:
(-IBOR) payment frequency: 1M
Underlying swap maturities (tail): 1Y, 2Y, 5Y, 10Y, 15Y and 20Y
Swaption expiries: 1M, 3M, 6M, ...
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38 views
Estimation of time series using GARCH on Eviews
Firstly I should mention that I am new to both Eviews and GARCH models.
Anyway, I am conducting some research into the effect that different macroeconomic factors have had on stock index volatility ...
