Questions tagged [volatility]
A measure of the variation in price over time. Also a measure of the risk of a financial instrument.
1,136
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On a relative level how do you value single name volatility? [closed]
Let's say I am looking to price AAPL 30 day volatility on a relative level.
My first thought would be to take SPY vols and multiply it by AAPL's beta.
But this leaves out the volatility caused by the ...
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104 views
Clarifying statement on volatility, stock returns prediction, and beta
I am trying to interpret a statement about volatility and stock returns made during an interview which I really do not understand. The original task was as follows:
Given a time series of the ...
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1answer
165 views
Derive the price of log contract
I am reading the Neuberger [1999] Log Contract paper and really confused on the log contract.
So if the payoff is $\ln(S_T)$, then we can easily solve the price of such derivative:
$$f_t^s = e^{-r(T-t)...
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1answer
112 views
Ranking volatilty measures
I am creating a SQL query for a model I am developing that uses historical volatility. I am using the below methods to determine historical volatility:
close to close zero mean
close to close ...
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63 views
LIBOR-in-arrears swap
Let's say we have a situation where all 12-month LIBOR forward rates at 8% per annum with annual compounding. All cap volatilities are 16%. Estimates the difference between the way a sophisticated ...
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79 views
Volatility of American vs European Stock option return
Let's say that I hold an American Call Option (ACO) and an European Call Option (ECO) in my portfolio on the same underlying, with same strike price and same maturity date. Given that I hold both ...
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1answer
112 views
Triangular Arbitrage In FX Volatility
If I know the price of $GBPUSD$ and $EURUSD$, I can retrive the $EURGBP$ price simple by $EURGBP = \frac{GBPUSD}{EURUSD}$.
Is there something equivalent to FX Volatility? Knowing the $\sigma_{GBPUSD}$,...
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59 views
Calculating average portfolio volatility
I have a question regarding calculating portfolio volatility. In my "problem", there are six portfolios. Five that have a holding length of one year and one that has a holding length of 200 ...
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64 views
Is there any relationship between the straddle range and the trading range?
The short straddle has 2 breakeven points. It’s profit zone is between those breakeven points and I would call it the straddle range.
A straddle is sold which has X days to expiration. The underlying’...
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37 views
Unable to link volatility structure to swaption pricing engine
Good morning,
I am trying to link the volatility surface to my swaption pricing engine.
...
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52 views
Building multivariate model to predict trading volumes
I am building a multivariate statistical model to forecast the trading volume of the S&P 500 stock based on its previous values and on other covariates. Being new to finance, I am having problems ...
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26 views
adjusting treasury futures exposure using micros
I want to decrease my exposure to a 10-year note futures by using 10-year micro futures after volatility-adjusting them. I've calculated that the difference in volatility in the micro has 5.125x the ...
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1answer
127 views
No-arbitrage conditions on a caps/floors volatility surface
Suppose that one has a caps/floors volatility surface and wants to check whether this surface admits arbitrage. What is the theoretical and practical way to do it?
Lets talk only about caps for ...
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1answer
83 views
Can you still sum the weighted up betas to find portfolio up beta, or not?
The portfolio beta in the conventional sense is simply the sum of weighted beta coefficients for each holding in the portfolio.
Is it the same for portfolio up and down beta, where I can simply take ...
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1answer
75 views
Quantlib HW 1f model calibration not fitting to market normal vol quotes
I am using Quantlib python to calibrate HW 1f model parameters from normal swaption vols quoted in the market (following the code in the cookbook - I fit both the mean-reversion & vol to market ...
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2answers
106 views
Approximating Volatility Skew From historic returns? [closed]
I was wondering if someone could help me with something. I've been reading more about equity options, and I'm struggling with skew. Conceptually I understand why it exists, what I'm struggling with is ...
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23 views
Durrleman's versus Ledoit & Santa-Clara's proof that short time to maturity limit of ATM IV is instantaneous vol
As far as I know there are at least two (perhaps more) proofs that under certain technical conditions the short time to maturity limit of the ATM implied vol is the instantaneous vol.
There is the ...
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16 views
Computing the average deviation range in a mean reverting series
Given a mean reverting time series, what's the appropriate measure to use to compute the range it deviates by before reversion? Assuming normal distribution, taking standard deviations of the actual ...
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43 views
how should i interpret the gjr-garch output where the gamma coefficient comes positives but insignificant?
i run gjrgarch model on russia stock market where the gamma coefficient in gjrgarch(1,1) model output is insignificant but positive.
"gamma1 -0.026240 0.033785 -0.77669 0.437340"
how ...
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1answer
63 views
Significance of annualized volatility over 100% on the normal distribution? [closed]
Assume stock is 50 dollars. From what I understand, an annualized vol of 20% means there is a ~68% chance the stock will be between 40 and 60 a year from now; a ~95% chance it will be between 30 and ...
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1answer
110 views
Eurodollar futures volatility
Considering each point is 2500, how can I get the volatility of the jun 24 contract? On tastyworks I'm seeing a 0.7% iv for the contract, how can I translate it to standard deviation? Ex:sp500 15%...
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24 views
Trailing stop (long-only) based on annualized volatilty
I am wondering if there is a rule-of-thumb for setting a trailing stop (fixed percent) if you know the annualized volatity. I calculate volatility from daily close price using the simple returns, $...
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60 views
returns, standard deviation and mean absolute deviation
I'm trying to understand the relationships between return, standard deviation and mean absolute deviation.
I saw someone mention:
$daily return * 16 \approx annualized volatility$
$weekly return * 7.2 ...
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23 views
Where to find retail trading volume data?
I have plans to work on a paper to study a possible correlation between fluctuations (volatility) in the European and American markets with retail trading activity, either dollar and/or ticket volume.
...
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1answer
83 views
is implied volatility derived from the option bid quote or the option ask quote?
I got SPX option prices from three different market data sources. In all of them, I can see bid and ask quotes. However, there is only one implied volatility. Does this implied volatility correspond ...
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1answer
295 views
Fitting a volatility smile with pySABR -- Python implementation of SABR model
In order to model some volatility smiles I'm using the python's pySABR package.
I ran into a situation when I have two almost identical pieces of code for two different volatility smiles missing the ...
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66 views
Why calibrate vol based on consensus?
I am starting to work on building vol surfaces using implied vols on the short run mixed up with consensus vols ran through a whole bunch of interpolation/calibration/smoothing process.
Although I ...
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1answer
143 views
Rogers Satchell Volatility
I am trying to implement Roger Satchell volatility in Go, but my results do not match reality... I have been at this all day, but cannot find my error. The 30 day Rogers Satchell vol is at 8.75%, but ...
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1answer
128 views
Data source for FX options
I have daily quotes for the new york and london fixings of fx options on EURUSD. I can choose between two sources: BGN and CMPN. Apparently these are based on slightly different methods of aggregating ...
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47 views
Volatility basics: what happens to implied volatility of stock in week of earnings and dividend payment?
Question: Imagine it is a Monday. Company A (stock you are following) has an upcoming dividend payment on Wednesday and an earnings announcement on Thursday. Company A stock is currently trading at \$...
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58 views
Infill lower frequency data: Brownian Bridge
Given monthly returns data, I would like to infill those to get daily returns. Roughly estimates imply that annual volatility is about 1.5x of SPY. One option that came up in my initial research was ...
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1answer
183 views
Mathematical solution to return decay of daily leveraged products (leveraged ETFs)
Daily leveraged ETFs have an inherent path dependence. An index performing (5%, -5%, 5%) on 3 days has an overall performance of 2.9%. A -1x leveraged ETF would perform -3.1%. At a higher volatility, ...
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1answer
81 views
Annualization of discrete returns
There is a well known approach to annualize volatility of log-returns for a given frequency. Let $P(t)$ a price process and define a log return $r_l(t)$ as
$$r_l(t) = \ln \left( \frac{P(t)}{P(t-1)} \...
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CMS cap has more vega exposure than CMS floor for same strike
When I priced a 10y expiry single look CMS30 ATMF CAP, I noticed that the vega exposure is higher than that of the same 10y expiry single look CMS30 ATMF FLOOR. Why is that?
I have a suspicion that it ...
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65 views
Fitting ARIMA + GARCH in R
I'm forecasting Electricity consumption Data. I have data for one year , so for every 15 minutes there is an observation. My data contains seasonality and I don't know how to fit SARIMA + GARCH into R,...
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67 views
Does my caplet stripped volatility surface make any sense?
My goal is to build a volatility surface for caps on a 3M index implied from SABR model. I have a set of cap normal volatilities for a range of strikes (4%, 6%, 8%, 10% and ATM) and maturities (1, 2, ...
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60 views
Yield curve steepening/flattening using different duration treasury futures (TUT Spread) and volatility
Yield curve steepening: long 2 contracts 2 year (2 contracts due to contract size), short 1 contract 10 year
Vice versa for flattening.
If the 2 year note has a expected volatility of 2% per contract (...
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78 views
Spot-Vol covariance and risk reversals
I have been looking into the covariance between log spot returns and log IV returns over a variety of tenors and lookback windows. However I am not sure how these numbers relate back to the outright ...
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53 views
sizing fx futures trades by targeting volatility
If I lever up a JPY/USD futures with a 6% volatility/contract 2x to meet my 12% volatility target, how many contracts should I buy per $100,000 I have in liquidity? How do I size my position based on ...
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Are there any public implementations of realized kernels? (preferably in Python)
looking to implement a realized kernel model to forecast realized variance of around ~140 equities and indices in Python given order book data.
I have read "Realised Kernels in Practice: Trades ...
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27 views
Charting Annual Volatility From Start Date In a Line Plot
I'm pretty new to python/data viz and this is my first time asking a question on here but I have a df with monthly price data back to 2016 for 6 different instruments. I just want to be able to ...
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33 views
Reduced volatility in local stochastic volatility model
in Local Stochastic Volatility models I always read or hear "first the stochastic volatility model is calibrated to reduced vols and then the local volatility model corrects it" also I head ...
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1answer
59 views
Using converted lognormal volatilities for negative rates in a lognormal Libor Market Model (LMM)
There exist formulas to convert between normal and lognormal interest rate volatilities. In the most simple form the approximation for ATM volatilities would be $\sigma_{LogNorm}=\frac{\sigma_{Norm}}{\...
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223 views
What is Nassim Taleb's Stance on Volatility
Over the years I have read all of Taleb's Incerto. I recall him more or less writing that "stock returns have no second moment". Hence stock volatilities, defined via the standard deviation ...
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1answer
180 views
Understanding out-of-sample performance metrics for Realized Volatility
I fitted several models on a realized volatility process and then proceeded to obtain out-of-sample results. I'm struggling to interpret these results apart from to tell model A seems better than ...
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54 views
Rationale for Historical Volatility definition
I think I understand the most common definition for historical volatility (standard deviation of log returns), but it has me puzzled because it conflicts with my intuitive idea of what volatility is. ...
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252 views
Vol, Gamma, Vega -- essentially all the same?
When talking to traders I hear this sentence a lot
I am a buyer/seller of X
where X = {vol, gamma, vega}
Is X basically all the same -- they are just saying -- I think implied volatility is cheap or ...
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44 views
Maximum market volatility
I program trading algorithms that create profits from unpredictable market fluctuations. I am looking for markets with the most extreme fluctuations and I need them to fluctuate up and down in a zig-...
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1answer
100 views
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Examining the dependence of the fractional difference parameter in ARFIMA(0,d,0) vs bar size for Realized Volatility
Realized volatility is a long-memory process and so I fitted an ARFIMA(0,d,0) to log(RV15) where RV15 is realized volatility calculated from 15-min bars. I proceeded to examine how changing the bar ...