Questions tagged [volatility-surface]
The volatility-surface tag has no usage guidance.
30
questions
1
vote
1answer
35 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
vote
1answer
36 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
72 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 ...
3
votes
1answer
111 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
votes
1answer
85 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 ...
2
votes
0answers
39 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?
1
vote
3answers
264 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
0
votes
0answers
15 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 ...
0
votes
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{...
2
votes
0answers
46 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
160 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
114 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 (...
1
vote
1answer
99 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 ...
0
votes
0answers
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?
1
vote
0answers
95 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
votes
0answers
115 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
vote
1answer
95 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
vote
1answer
395 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
139 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
232 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 ...
0
votes
0answers
36 views
Data request: Option prices for a liquid index/stock
Currently doing a course project on option pricing as a part of my undergraduate studies. However I cannot find a free dataset $D=[d_1,d_2,...,d_N]$, which would represent a time-serie of daily option ...
1
vote
1answer
78 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
375 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 ...
1
vote
0answers
72 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
300 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
696 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
656 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
votes
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) ...
1
vote
0answers
143 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/...
