Questions tagged [volatility-interpolation]
The volatility-interpolation tag has no usage guidance.
17 questions
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Interpolating the volatility cube of European Swaptions
I'm in a situation where I have a cube of European swaption volatilities (normal volatilities), which contains only scattered data.
Since it is three dimensional (Tenor, Term, Strikes) I'm having a ...
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When getting the local vol surface from the implied vol surface, do we interpolate the strikes?
Using the dupire method:
$$\sigma(T, K)=\sqrt{\frac{\sigma_{\mathrm{imp}}^2+2 \sigma_{\mathrm{imp}} T\left(\frac{\partial \sigma_{\mathrm{imp}}}{\partial T}+(r-q) K \frac{\partial \sigma_{\mathrm{imp}}...
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How to interpolate volatility's skew using spline in Python
I have two lists to describe the function y(x) that represents strikes and the relative value of the skew of a volatility surface:
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how to interpolate and extrapolate the local volatility surface?
Local volatility can be computed in terms of call prices using Dupire's formula. Assume we have a rectangle call price surface, let's say $I = [30,60]\times[1 day, 1year]$.
For interpolation, should ...
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Dividend adjustment on SABR formula for interpolating implied volatility
We are using a SABR model to interpolate the implied volatility surface.
The model yields a formula for implied volatility that contains the following term:
$\ln \left(\frac{K}{F}\right)$
It is ...
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Volatility surface interpolation for Black-Scholes delta hedging
A general question for interpolation method for implied volatility between tenors. I've recently stumbled accross a dataset from http://www.math.ku.dk/rolf/Svend/, and I would like to interpolate the ...
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Why use moneyness as an axis on a volatility surface
A simple volatility surface might have X axis = strike, Y axis = expiry and Z axis = implied volatility. But in many papers I see them use moneyness instead of strike. I have two questions.
Why do ...
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Interpolation of FX Vol Surface from non-uniform strike vs tenor grid
TL;DR
I'm trying to fit a vol surface to market FX options quotes in order to build a local vol model to price with. Unlike listed options that typically have a nice rectangular grid of strikes and ...
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Three questions regarding local volatility implementation (based on the Andreasen, Huge article "Volatility interpolation")
I am new to the area of local volatility interpolation and I am trying to make a decent implementation for calculating the local volatility surface from option prices using the basic methodology from ...
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Volatility time weights calculation
I. Clark introduces the concept of volatility time in Foreign Exchange Option Pricing under which the implied volatility should be interpolated in time with the formula below:
where w is a weight ...
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FX Smile Curve Extrapolation [duplicate]
How a smooth smile curve is generated from 5 smile points : 10D RR, 25D RR, 10D SM, 25D SM and ATM? What are the commonly used extrapolation and interpolation techniques?
I have seen people ...
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FX smile extrapolation
Typically, 5 points data is available for smile construction : 25D RR, 25D SM, 10D RR, 10D SM and ATM. Questions: 1. How is a smooth smile curve generated with the help of these? 2. How is ...
- 605
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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 ...
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spline Interpolation on volatility surface not smooth
I am testing spline interpolation for volatility surface with Matlab griddedInterpolant function with spline as interpolation and extrapolation method.
Here is the original data I used to do ...
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Volatility surface tenors
I don't think this has been asked before, but are the tenors on a volatility surface out of spot date for the currency pair or out of value T+0?
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Getting option volatility off vol surface
I am currently looking into FX options. I am given a delta-tenor vol surface and I want to get the volatility of an option given its strike and time to expiry. I am reading about the method used and ...
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Reference: Vanna, volga, vega approximations
I am looking for a reference on how to approximate implied volatility in a stochastic model vis-a-vis vanna, volga, vega, and other model parameters, in particular the derivation of such equations and ...
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