Questions tagged [volatility-surface]

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0answers
98 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 ...
4
votes
1answer
636 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."
4
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1answer
327 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 ...
4
votes
1answer
116 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 ...
4
votes
1answer
654 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
198 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 ...
3
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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
106 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 (...
3
votes
1answer
984 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) ...
2
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1answer
70 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
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0answers
32 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?
2
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0answers
39 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 ...
2
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2answers
122 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 ...
1
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3answers
215 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
1
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1answer
86 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
352 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 ...
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0answers
85 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: ...
1
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0answers
67 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 ...
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0answers
136 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/...
1
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1answer
72 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 ...
1
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1answer
284 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 ...
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0answers
14 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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1answer
85 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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0answers
31 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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35 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 ...