Questions tagged [volatility]
A measure of the variation in price over time. Also a measure of the risk of a financial instrument.
809
questions
0
votes
0answers
7 views
Local volatility Formula and How To use it
I'm new to Volatility Modelling, so the content of this question may be completely wrong and th question naive. I'm reading "The volatility surface" by Gatheral. I'm trying to get a sense of the first ...
1
vote
1answer
24 views
Why is volatility skew/smile for long term options flatter compare to short term options?
Volatility skew/smile for long term options is flatter compared to short term options, could someone help to explain why is that the case? Thanks
2
votes
0answers
18 views
TSRV parameters selection
I'm thinking about how to select the $J$, and particularly, $K$ parameters for the Two Scale Realized Volatility estimation? I cannot find any reference for that in the original paper - there it says $...
2
votes
0answers
18 views
HAR-RV model for predicting 1-min volatility
I would like to use HAR-RV model (Heterogenous AutoRegressive - Realized Volatility) to predict a 1 minute realised volatility using the HAR model. As regressors I intend to use RV of previous minute, ...
1
vote
0answers
32 views
relationship between option vol and option payoff
Has anyone thought of the relationship between the option vol and distribution of option payoff? for example, I have 1000 paths of simulated underlying prices, keeping all inputs the same but only ...
0
votes
0answers
7 views
How to compute reference share price and reference volatility in CreditGrade?
I'm trying to implement CreditGrade in python, from the msci Technical Notes (https://www.msci.com/documents/10199/dd31bcce-6fe3-47b7-9fb7-10c4c8f750ba) but I'm running into some comprehension trouble ...
0
votes
0answers
17 views
The best ways to compare Monthly historical volatily [on hold]
Can you help me with the best ways to analyze/report about of difference between recents months in terms of volatility?
I want to demonstrate with "numbers" why a month had been more volatile than ...
1
vote
1answer
57 views
Duan (1995) GARCH Option Pricing Model with MATLAB
This is the MATLAB code that replicates the option pricing model proposed by Duan in his paper "The GARCH Option Pricing Model". However, the parameters estimated in the file do not match with the ...
1
vote
1answer
71 views
Realized Volatility Methods
Can someone explain to me which of these two methods is more accurate or commonly used to calculate Realized Volatility? I'm seeing both used, but I get very different results from them.
1) Standard ...
1
vote
0answers
54 views
Different definitions of volatility (simple question)
I have a basic question on volatility that I wanted some clarification on.
In finance books (such as Hull), there's a few different ways volatility is defined. One of them is the standard deviation ...
2
votes
1answer
53 views
annualized volatility formula is an approximation?
suddenly having troubles with the annualized volatility formula... is it really an approximation?
one usually writes the standard deviation of the yearly percentage change in the stock price as $$\...
0
votes
1answer
44 views
Weighting schemes - Volatility
One extension to this weighting scheme is to assume a long-run variance level in addition to weighted squared return observations. The most frequently used model is an autoregressive conditional ...
0
votes
1answer
20 views
Can I use root mean square(RMS) to calculate volatility of intraday feed data?
I've been using standard deviation as a direct/simple approach to calculate volatility of a given intraday feed data. My question is it logical/sensible that using root mean square (RMS), which is the ...
1
vote
2answers
68 views
Why do stocks with high sensitivities to innovations in volatility have low average returns?
Ang, Xing and Zhang (2006) state that "stocks with high sensitivities to innovations in aggregate volatility have low average returns". I am familiar that this question has been asked before in ...
1
vote
1answer
43 views
How to calculate standard deviation cone around expected returns?
I would like to evaluate the returns of an investment manager who has given me their return and volatility expectations for their fund. I would like to calculate both 1 and 2 standard deviations from ...
3
votes
1answer
48 views
CDS volatility: daily return calculated by simple substraction (Pt - Pt-1)?
I am working on validating the CDS volatility generated by a third party risk engine. It appears that returns are calculated with simple substractions and adjusted for the CS01:
(Price of the CDS ...
2
votes
0answers
44 views
“high sensitivity to innovations in aggregate volatility”" [duplicate]
Ang, Xing and Zhang (2006) state that "stocks with high sensitivities to innovations in aggregate volatility have low average returns".
I am familiar that this question has been asked before in ...
1
vote
2answers
92 views
Stock Volatility with Uncertain Probability
Suppose that the probability that determines the state of the economy is unknown. That is, you do not know whether the booms or recessions are more likely. Calculate the expected return and the ...
3
votes
1answer
81 views
model high frequency bitcoin volatility
I am trying to model volatility of 1-minute returns of BTC, but it seems to me that the data do not behave traditionally. I tried fitting GARCH, eGARCH with ARMA (1,1) or (2,0), but I am not confident ...
4
votes
1answer
100 views
Why do we fit volatility surfaces implied from a option pricing model to the empirical data?
As far as I understand volatility surface. It is made of 2 components, the volatility skew/smile and the volatility term structure. Together they form something like
Implied volatility is ...
2
votes
0answers
27 views
how to model NGARCH using 5min frequency data?
NGARCH model using 5-min High-frequency data in R
I wanted to analyze some 5 minute frequency data of stock market. My teacher asked me to use NGARCH to model, but I didn't know how to program.Here ...
2
votes
0answers
69 views
Why do coefficients flip after the including a lag in the optimisation? implied volatility/skewness/ivspreads
I'm hoping some of you guys can help me out. I am applying the paramametric portfolio optimisation of Brandt, Michael W., Pedro Santa-Clara, and Rossen Valkanov. in which the weights on specific ...
8
votes
3answers
553 views
What is the appropriate benchmark for a Long/Short VIX futures strategy?
Trying to figure out the benchmark for a L/S Vix futures stragegy, doesn't seem like only long or short Vix futures would be appropriate, any ideas? Thx
0
votes
0answers
48 views
looking for a simple realistic parametric volatility model
Which parametric volatility is realistic to test quickly and qualitatively a model?
I do not wish to fit market quotes but would like to have a non-trivial volatility with skew or smile to do some MC ...
2
votes
1answer
83 views
What is the annualized realized volatility of simulated Brownian motion paths?
I saw this following question in an exam.
Take a Brownian motion simulation with drift 5% and annualized volatility of 20% for a period of 1 year. Then the annualized realized volatility of the ...
0
votes
0answers
30 views
Negative drift when calibrating GBM parameters
Setup for question:
Consider a basket of $N$ stocks $\{S^1, S^2, \dots, S^N\}$. For fixed strike $K$, each stock in the basket, $S^i$, follows the SDE
$$dS_t^i = \mu^i(t) S_t^i dt + \sigma^i(K, t) ...
0
votes
1answer
40 views
Confidence Intervals for ARMA+GARCH forecasts
I have fitted an ARMA(1,1)+GARCH(1,1) model to my logreturns series. When it comes to my standarized error's distribution however, I have opted for a Skewed Generalized Error Distribution, because of ...
0
votes
0answers
22 views
Arbitrage bounds on volatility of price of binary option?
What are the arbitrage bounds on the volatility of the price of a binary option? If the binary price moves too much (such that it violates the arbitrage bounds) what trades would you actually execute ...
0
votes
0answers
23 views
How do I export data from the volatility lab?
I am trying to export data from the volatility lab within the interactive brokers TWS platform.
Specifically, I am interested in implied volatility and historical volatility for specific tickers.
...
0
votes
0answers
21 views
Volatility Skew fitting in R; Calculate option delta using various volatility dynamics
Given a fixed maturity option chain, i was wondering if there is any way to evaluation an option against this volatility surface and compute the various delta of the options wrt to volatility dynamics ...
4
votes
0answers
81 views
Anyone know if this daily report discontinue to publish? Goldman Sachs - “Global Index Volatility and Correlation Monitor”
I used to receive this daily report in my workplace from Goldman Sachs mailing list but the mailing list discontinued in May 2019 without any notice.
The report is an pdf attachment which send from "...
5
votes
3answers
187 views
Can increase in volatility reduce the price of a deeply in-the-money European put?
Hull states that option prices increase with an increase in volatility.
I think that statement could be false in a specific scenario: when we are considering a deeply in-the-money European put ...
1
vote
0answers
26 views
Price moneyness vs spread moneyness for credit index options (CDX HY)
Is spread moneyness equivalent to price moneyness for volatility surfaces of CDX HY? In other words, is the ISDA converter a linear transformation?
I have market data that I need to convert to input ...
2
votes
0answers
81 views
Is it possible to compute implied returns from volatility?
If we assume that, broadly speaking:
Assets in liquid markets are fairly priced to its value
Volatility is predictable (volatility clustering, GARCH, etc)
Investors are rewarded and earn a return for ...
2
votes
1answer
85 views
Convert volatility to yield
I have an elementary bond volatility math question - if 5y black vol is 38 and normal vol is 68, and the yield is 1.85%, how do I calculate 1 stdev in yield terms? As in how many basis points (or ...
2
votes
2answers
101 views
Converting 30day annualized vol to 2day annualized vol
I would like to convert 30-day annualized volatility $\sigma_{30d}^a$ to 2-day annualized volatility $\sigma_{2d}^a$.
Am i right to say:
$$\sigma_{2d}^a = \sqrt{\frac{2}{30}} \cdot \sigma_{30d}^a$$
...
0
votes
0answers
35 views
Varswap replication product
I would like to ask about a product that some Flow desks sell : Varswap replication strategies. I know that it consists of weighted basket of calls and puts , however I would like to know how does it ...
2
votes
1answer
52 views
stock specific volatility
I was unsure about the precise definition of "stock specific volatility". Used in this question "A stock has beta of 2.0 and stock specific daily volatility of 0.02. Suppose that yesterday's closing ...
0
votes
0answers
38 views
Spread vol for interest rate spread options in normal environment
Suppose I am long spread option with underlying : rate A - rate B. The vega on the option would be positive. But if I want to compute the option vega with respect to individual rates, can I use the ...
2
votes
0answers
39 views
Is $\sigma_{1} = \frac{\sigma_{\tau}}{\sqrt{\tau}}$ suitable for volatility scaling?
It seems to be the de-facto method; and I see how we get it from log-normal assumption.
However volatility scaling seems to be way more sensitive to $\tau$ than mean scaling -- as in two ~ 2 times (...
2
votes
1answer
87 views
Trading Vol with options
One can trade vol swap to get exposure of the volatility of the underlying security in a 'clean' way. On the other hand, we know that vol swap, theoretically can be replicated by a dynamic position of ...
1
vote
0answers
38 views
Swaption pricing and strategies
I am looking for resources (books, papers, websites, etc.) that deal with Vanilla and Exotic swaptions from a more advanced and quantitative perspective. I am interested in both the pricing side (e.g. ...
0
votes
0answers
32 views
Implied volatility of Treasury options
For practitioners, does the concept of implied volatility also apply to (European) Treasury Options (whose underlying is Treasury Futures contracts)?
For the standard individual stock vanilla ...
0
votes
0answers
67 views
Interpolation of SVI Implied Volatility in parameter space
I am currently working with a slice-wise SVI parametrisation of the implied volatility surface.
$\sigma^2(x,t) = a_t + b_t (\rho_t (x - m_t) + \sqrt{(x - m_t)^2 + \theta^2})$
Does anyone have ...
3
votes
1answer
140 views
Dorfleitner's Standard Deviation
Can someone please advise how to compute the following (as my results go into thousands):
E.g. I have used
and the result (for T=12) = 580103.7261
Thanks
0
votes
0answers
43 views
Calculation of the risk free rate
For portfolio management I need the risk-free to compute the sharpe ratio.
I would like the use to rate on the 3 month treasury bill from the US.
https://fred.stlouisfed.org/series/TB3MS#0
The ...
1
vote
0answers
66 views
What is the cause of a “broken” volatility surface?
I am currently working on a project for which I need the implied volatility surfaces, to estimate the value of plain-vanilla European options with different strikes (cannot be observed directly in the ...
2
votes
2answers
113 views
What is the best book to learn about local vs. stochastic volatility, modelling and pricing of Exotics?
I am starting to delve into the world of Exotics and I am trying to find a rigorous yet understandable book that covers both mathematically and qualitatively (especially mathematically) the following ...
1
vote
1answer
82 views
Volatility Skew Theory
This is the case for equity options, however for foreign exchange options the volatility only decreased at ATM.
Why is it that the vol used for one type of out/in the money is higher than the other, ...
0
votes
1answer
130 views
Squared returns and volatility
Squared returns are considered pillars of GARCH/ARCH modelling and most used method for forecasting or studying volatility.
Can you tell me how to calculate it from simple stock price.
Is it better ...
