Questions tagged [volatility-surface]
The volatility-surface tag has no usage guidance.
35
questions
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2answers
58 views
Swaption Vol surface
¿How can I get the implied vol from a swaption when I have a vol surface with the maturity of the option and the tenor of the swap? For example I want to know what is the volatility for a swaption ...
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1answer
54 views
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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1answer
81 views
Delta Skew Measure as volatility changes
I'm reading Trading Volatility (Colin Bennett) and there's a phrase regarding delta skew measure on p. 208 that I don't quite understand:
An example of skew measured by delta is [25 delta put - 25 ...
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2answers
64 views
calibration - negative call price [closed]
Im trying to calibrate a stochastic volatility model to market. I end with an MSE of 2-3 with approximately 500 quotes. Some out of the money options with call-price under 1 dollar ends up being ...
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0answers
33 views
Relationship between Calendar Spread Arbitrage and Probability Density Function (pdf)
We all know that the butterfly spread no-arbitrage condition can be expressed as an inequality restriction on the second-order derivative $\partial ^2C/\partial K^2 \geq 0$, which also means the ...
0
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1answer
54 views
Does the Heston calibration have to be done on an arbitrage-free surface?
In a similar way to local volatility?
I'm trying to calibrate a surface, but the results aren't convincing, so I was wondering if it was necessary to first use a way to regulate it (splines, ...
1
vote
1answer
68 views
Should we calculate the implied volatility surface with Put+Call?
We have Sungard data (MarketPlace8), but for nearby maturities the ask-bid of the calls are all the same when we are out of the money (call), so should we calculate the implied volatilities of calls ...
1
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1answer
43 views
Surface plots of the mean-variance efficient frontier
3d surface plots contain an X, Y and Z axis. For the mean-variance efficient frontier:
X axis is portfolio volatility ($\sigma_p$)
Y axis is portfolio expected return ($\mu_p$)
any ideas for what ...
2
votes
1answer
101 views
How to get the local volatility from IV surface?
I have to work on Dupire's model.
If I understand Fengler's paper well enough we can get the local volatility from implied volatility smoothed surface because if not it would look all bumpy like the ...
4
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1answer
149 views
Different volatility surface ( Local vol, Stochastic vol etc.)
Despite many questions about local and stochastic volatility available on this forum, i still have a few doubts left. Essentially I am seeking validation whether I am interpreting things correctly.
...
2
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1answer
91 views
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 ...
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0answers
80 views
Smile Strangle and Market Strangle
What is the difference between Smile Strangle margin and Market Strangle Margin in fx derivative market? Is it just variation in convention or is there any mathematical relationship between the two?
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3answers
310 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
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19 views
Applications of a calibrated price or IV surface and other basic questions
Newbie here with basic questions. I have researched the topic online, but am still at a loss. I went through a nice course on calibration, saw how to apply stochastic short rate, stochastic vol, jump ...
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0answers
29 views
Arbitrage free volatility smile and delta
If we have a (parametric) volatility surface which has arbitrage, then consider the delta of the options, i.e. $N(d_1)$, where
$d_1 = \frac{1}{\sqrt{t}\sigma(K)}\log(F/K) + \frac{1}{2}\sigma(K)\sqrt{...
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0answers
55 views
Vol surface fitting to options on commodity futures
Trying to fit variants of SVI (Zeliade method, SSVI etc) to options on futures price data. One of the core ideas of the SVI parameterization is the absence of calendar spread arbitrage.
I think the ...
5
votes
1answer
274 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 ...
3
votes
1answer
117 views
Question about volatility surfaces
As a learner, I'm curious to know the answer to 2 questions regarding volatility surfaces
1) It's stated that volatility surface should be flat accdording to Black-Scholes model. Why is that? Time (...
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1answer
113 views
Compute implied volatility surface of a put option from a call option
Suppose the function double bsCall(double S0, const double &K, double T, double r, double sigma) computes analytically the Black-Scholes price of a call option ...
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34 views
Is the implied volatility surface relative or stationary?
Do different strike values of options attain their volatility value dependent on their % distance from the ATM price continuously, or is the volatility surface stationary during a single day?
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0answers
113 views
Pricing forward start Cliquet option with implied volatility with Dupire
I have the following implied volatility matrix of a stock index downloaded the 15th February 2019, the value of the stock was 3188.44 at the time:
...
5
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0answers
141 views
Implied Funding/Borrow Costs in Short-Dated ETF Option Prices
I'm struggling with some anomalous behavior in an analysis I'm running and was hoping for some advice/insights. I'm attempting to extract the implied funding/borrow costs from ETF option prices (say ...
1
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1answer
106 views
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?
1
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1answer
436 views
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 ...
2
votes
2answers
151 views
Difference between volatility measures of a basket of assets
I am trying to understand intuitively the difference between two different measures of realized variance of a basket of assets.
The first measure I am aware of is when you take the realized variance ...
4
votes
1answer
253 views
SSVI parametrization motivation , SSVI implementation
I've read the following paper of Gatheral and Jacquier https://arxiv.org/pdf/1204.0646.pdf about volatility surfaces. I'm thinking about the SSVI surface. Is there any motivation why they choose ...
1
vote
1answer
81 views
Filter options used in the construction of implied volatility surface
Currently trying to model the IV Surface using the APPL options, to compare how different models of the underlying move the IV Surface. However, after getting the data, I've seen that some option ...
4
votes
1answer
431 views
Intuition for the Effect of Vol of Vol in Heston Model on Volatility Surface
I was hoping someone could describe the economic/mathematical intuition behind the effect that the vol of vol parameter has on the volatility surface, in particular the slope to maturity. Take for ...
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0answers
74 views
How to derive the change in portfolio value as given by Gatheral in The Volatility Surface?
I’m trying to follow Gatheral’s Volatility Surface Ch. 1, i.e. the text (pg. 5 and 6) linked to in this question, with further text discussed in this question. I can’t figure out how to arrive at the ...
1
vote
1answer
316 views
SVI Zeliade Vol Surface Calibration
Have a question about SVI Zeliade Implementation (pdf, overview).
The paper suggested to do 2 rounds of optimization, first for $\{a,b,\rho\}$ and 2nd for $\{m,\sigma\}$.
Does anyone know if I can ...
4
votes
1answer
742 views
What interpretation can I derive from an inverted volatility surface?
While pulling some reports from Bloomberg today I came across the volatility surface for NYSE: ONDK, set for an earnings call next Monday. From what I've seen before (not much, 1 month on the job and ...
4
votes
1answer
710 views
Proof of arbitrage-free implied volatility surface in relation to local volatility surfaces
I'm looking for proof of the following statement:
"The existence of an arbitrage-free implied volatility surface is
equivalent to the existence of a well-defined local volatility
surface."
3
votes
1answer
2k views
Implied Volatility Surface - log forward moneyness
I'm reading this paper by Fengler (2005) and have came across the below snippet.
context: Implied volatiltiy surface plot has 3 dimensions IV, Strike, Time to Maturity. Author replaced Strike with ...
3
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1answer
1k views
Spot and Vol Correlation in Idealised Regimes of the Volatility Surface
From http://www.globalvolatilitysummit.com/wp-content/uploads/2015/10/Santander-Volatility-Trading-Primer-Part-II.pdf it states that there are the four idealised regimes of volatility surface.
1) ...
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0answers
147 views
IV surface quoted Skew/Curtosis/Putwing/CallWing
I came across a volatility surface quoted in unknown format to me.
I have ATM Vol Skew Kurtosis PutWing and CallWing
each for particular tenor.
Any idea of what these represent/...
