A measure of the variation in price over time. Also a measure of the risk of a financial instrument.
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31 views
Optimal time series length to calculate historical volatility
What length of time series is best to calculate the historical volatility of interest rates and why?
0
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0answers
26 views
Is the volatility smile independent of the volatility itself?
Under "similar" market expectations, is the shape of the volatility smile the same for a volatility (^VIX, https://finance.yahoo.com/quote/%5EVIX/) of 13, 25, 36, > 50 etc? Or does it flatten more ...
-1
votes
1answer
38 views
Calculate Idiosyncratic Risk?
I have basic finance background but I am trying to calculate idiosyncratic risk as measure for firm risk in my CEO gender research.
I have found the following on Alpha architect but I am unsure of ...
1
vote
0answers
32 views
Does it make sense to calculate an option price in future (at t+1)?
Often I ask myself whether it makes sense to calculate the price of a Call at t+1 supposing for example that underlying asset does no move i.e. $S_{t+1} = S_{t}$ ...
1
vote
0answers
18 views
Identifying primary share class of U.S. firms and deleting excess observations
I have a fairly large dataset of CRSP firms with their daily closing prices from 2006 till 2017. I need to filter the data so that I have one daily observation per unique firm. I've identified the ...
0
votes
1answer
53 views
Drift of Local Volatility Model - Dupire
i understand that the local volatility function can be computed from the implied volatility surface.(i.e there is no calibration to option prices, we just need the full implied volatility surface only)...
2
votes
1answer
54 views
Choosing the Correct Periods for Yang-Zhang Volatility
I am implementing the formula for YZ Volatility using this link.
I am testing it on hourly Forex charts and I'm getting some strange numbers. Taking the 14 day YZ volatility using ...
-1
votes
0answers
33 views
Portfolio semideviation
Is it possible to calculate portfolio semideviation analogically to portfolio volatility, i.e., by weighting particular asset's semideviation by their participation in total portfolio worth? I would ...
0
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0answers
36 views
Can someone give a simple example of how stochastic volatility leads to volatility skew/smile?
I've been trying to understand skew and volatility, unfortunately I don't have the mathematical background to necessarily dive into some of the papers, I've tried but the mathematics can overtake me.
...
0
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0answers
69 views
Portfolio risk analysis
I would like to ask you if somone knows how to generate risk measures (such as VaR, Beta, Drawdown, Volatility, etc...) over a Portfolio that hold positions for approximately 7 working days.
Imagine ...
0
votes
1answer
35 views
Finding Equity Volatility for the Standard Merton Model
I am working on a project studying historical accuracy of the standard Merton Model, but am struggling to follow the required inputs. I seem to read conflicting definitions of the information I need.
...
1
vote
1answer
52 views
Options volatility margin
A basic question.
When traders structure a product in which they are long an option, how is the volatility surface shifted to take into account a margin ?
Is it a multiplicative coefficient, say 95% ...
0
votes
2answers
142 views
Mid-curve swaption
I would like to know how the mid-curve swaption could inform us about forward volatility.
In my understanding it is a swaption on a forward starting swap.
Let us say the midcurve swaption expires ...
1
vote
1answer
34 views
Can GARCH volatility simulations generally be applied to return-modelling models?
This may be a naive question, but I still hope some discussion can elucidate a (so far) totally nebulous point for me.
I've recently learned that GARCH models can give one simulations of ...
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0answers
61 views
How to construct a volatility surface?
Can someone please help me understand how I need to construct a volatility surface?
I have prices of a set of interest rate swaps with different terms and at the money options with different expiries....
0
votes
0answers
54 views
Modelling VIX futures backwardation
I have VIX futures trading algorithm and would like to perform Monte-Carlo simulation of VIX and understand how my algorithm performs on each simulation. In this case, not only VIX should be modeled, ...
3
votes
0answers
71 views
Simulation of a DCC-GARCH
I want to simulate some exchange rates with a DCC GARCH. I know the package rmgarch but I want to code the simulation my self. The following are the main equations ...
3
votes
1answer
75 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
44 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
2answers
109 views
Can I use implied volatility of stocks to predict the next days or weeks top 10 gainers and losers?
Is it true if I said that the stocks with the highest implied volatility for its options with just one day to expiration today will inadvertently be the stocks with the largest price movements on the ...
0
votes
0answers
25 views
HAR RV h steps ahead formula
In the formula for HAR RV (or variants) (Corsi (2009) ref) for h steps ahead the only parameter that depends from h is the error. Am I to assume that the only difference between the h=1 model and the ...
0
votes
2answers
116 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 ...
0
votes
1answer
119 views
Does the price of an asset need to be constant in order for its volatility to be zero? [closed]
What are the conditions for the volatility of an asset to be zero?
In my opinion, the only condition is that the return on the asset needs to be constant.
On the web, some people imply that the ...
0
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0answers
34 views
Is a stock with a steadily growing return considered to be volatile? [duplicate]
Let's say we plot the returns of a stock over some period of time and they form a perfectly straight line. Like this:
So the returns are steadily growing. Is this behavior considered volatile?
If it'...
2
votes
0answers
55 views
volatility for multiple time series
I have time series data for a total of 4 stocks and want to analyze the volatility of those. Moreover I want to demonstrate that they have the same volatility. As a response variable I would use log ...
2
votes
2answers
76 views
Can the dependent samples t test be used for this problem?
Short story:
I have 2 sets of data:
Set 1: Daily data of stock market returns (eg. [1%, 1.2%, -2%])
Set 2: Those same stock market returns, multiplied by a number (eg. [2%, 0.6%, -1%] which equals ...
1
vote
0answers
41 views
Autocall Calibration
I'm trying to price autocalls.
In theory my pricing method is ok (I followed Bouzoubaa's book procedure) but I'm not sure I read anything on calibration of autocalls. Basically my question is what ...
1
vote
0answers
58 views
Dynamically adjusting the size of a Constant Range Bar (on an intraday fx chart)
Constant Range Bars (CRB) is a type of candlestick charting method that does not draw a new candle every unit of time (like every 1/5/15/30 minutes), but every time the range (high-low) of the ...
0
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2answers
61 views
How do you factor in skew when assessing implied volatility for a non-atm option?
If you think volatility is too cheap, how do you decide if an ATM call or an upside call (which trades at lower vol because of skew) is better?
Let's say you have a $100 stock. You think the stock ...
1
vote
1answer
51 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 ...
0
votes
0answers
12 views
DCCfit speed up formula
I am estimating the covariance matrix by using GARCH DCC model with function dccfit from package rmgarch. My code is something like:
library(rugarch)
library(rmgarch)
...
5
votes
1answer
108 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
1answer
129 views
Which volatility as input in Black Scholes formula?
I am trying to price an option on an Index using Black Scholes formula. I estimated the daily volatility $\sigma_{day}$.
My question is should I use an annual volatility based on the business days of ...
1
vote
0answers
33 views
Mix a Forward Delta Premium Adjusted and a Forward Delta to construct the volatility surface
I have two brokers who give me delta strategies for USD-COP, but one of them gives me the issue with forward delta, the another one is premium adjusted. Besides, how can I mix them for construct a ...
4
votes
2answers
168 views
Vol swaps Vol of vol
I an quite unfamiliar with those products and would like to understand why they require a vol of vol model for pricing. The variance swap is replicated (assuming no cash dividends) with a delta hedged ...
2
votes
1answer
83 views
Can someone explain the 6 alternative volatility measures?
I'm reading this:
https://www.cmegroup.com/trading/fx/files/a_estimation_of_security_price.pdf
and am a bit confused as to why the "classical equation" on page 3 does not divide by n-1 nor use the ...
3
votes
1answer
78 views
Portfolio volatility of discontinuous portfolio
I would like to calculate an investor's average portfolio volatility as a measure of risk aversion. My problem is, that the portfolios are not continuous:
the investor can have an open position for ...
0
votes
1answer
173 views
What is the importance of alpha, beta, rho in the SABR volatility model?
I just read that SABR model is a stochastic volatility model, which attempts to capture the volatility smile in derivatives markets. The name stands for "stochastic alpha, beta, rho", referring to the ...
1
vote
0answers
34 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
134 views
Backtest with rolling volatility in R
So I'm very new in R. I want to backtest a strategy for 3 stocks SPY, EEM, AGG.
With library(RiskPortfolios), I can calculate
...
2
votes
1answer
58 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
50 views
Monte Carlo simulation based VaR: daily vs annual parameters
I am given the initial price, annualized return, and volatility of a security. I am trying to calculate annualized VaR using Monte Carlo simulation approach. To do this I will use the following ...
0
votes
0answers
47 views
Replication error of a long dated product
My question is a bit general : Hedging/Replicating a long-dated (FX) product with short-dated (FX) products leads to a replication/hedging error most of the times. Is it possible to quantify this ...
3
votes
0answers
121 views
Derivation of the Pnl of a Delta Hedged Straddle and Risk Reversal
In the link below, in the text it states the following equations:
Delta-hedged straddle P&L = Volatility Risk-premium
×|
Straddle Vega
|
and
Delta-hedged risk-reversal P&L:
...
0
votes
1answer
64 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 ...
1
vote
2answers
136 views
The BISAM fat-tailed volatility model vs EWMA volatility model
Came across the following marketing material where the company called BISAM (FactSet) aka FinAnalytica (?) has developed following fat-tailed volatility model:
$$ r_{t} = \mu + \epsilon_{t} $$
$$ \...
2
votes
2answers
292 views
Problems with local volatility models (vs stochastic volatility models)
Why is pricing with local volatility models are problem with exotics, mainly due to "the volatility surface is the market's current view of volatility and this will change in the future meaning the ...
0
votes
1answer
118 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 ...
0
votes
1answer
86 views
Which program for a DCC-MIDAS model?
for a thesis research, I plan to use a DCC-MIDAS model. The program I was working with (STATA) is not able to run this.
Do you have any suggestions as to which program is best for this analysis?
...
1
vote
0answers
71 views
Which stats are the best predictors of model sucess in real time? [closed]
What are the best predictors of real time model success in quantitative trading, i.e. # of transactions, length of backtest, StdDev, Skewness, Excess Kurtosis etc
and what are the numerical values of ...
