A message from our CEO about the future of Stack Overflow and Stack Exchange. Read now.

# Questions tagged [volatility]

A measure of the variation in price over time. Also a measure of the risk of a financial instrument.

213 questions with no upvoted or accepted answers
Filter by
Sorted by
Tagged with
788 views

### Variance swap volatility - ATMF vol, Skew and Curvature

In a pure diffusion setting, it is a well known result that the volatility $\sigma_T$ of a fresh-start variance swap of maturity $T$ as seen of $t=0$ verifies \begin{align} \sigma_T^2 &= \Bbb{E}_0^...
2k views

### Volatility-Based Envelopes

I am following an article by Mohamed Elsaiid (MFTA) about Volatility-Based Envelopes - a quite new technical indicator he has introduced, that is being used by Bloomberg. My goal is to get a simple ...
154 views

According to Dynamic Hedging: Managing Vanilla and Exotic Options (Taleb, 1997), the Parkison volatility estimator has several meaningful properties. It is defined $$P=\sqrt{\frac{1}{n}\sum_{i=1}^{n}\... 0answers 388 views ### Why are my GARCH forecasts biased? I've run an ARMA(1, 1)-GARCH(1, 1) model with normal density on log returns for twelve stocks. I computed the one-step-ahead out of sample forecast for daily volatility on a rolling windows for 500 ... 0answers 253 views ### implied volatility and strike price Assume for simplicity that the expiration time of an option is 1 the initial stock price is 1 and there is no dividend yield and the risk free return is 0. How is it possible to show that the ... 0answers 553 views ### Callable bond price sensitivity to Hull-White volatility changes I'm using classic Hull-White model for short term interest rate dynamic:$$dr(t)=[\theta(t)-\alpha(t)r(t)]dt+\sigma(t)dW(t)$$(Notation is quite intuitive, anyway I am using the same as Wikipedia ... 0answers 1k views ### Asymmetric Volatility Modeling (Interpretation) I am currently writing a paper on asymmetric volatility modeling of brent, gold, silver, wheat, soybean and corn from 1986-2012 and divided them into 4 sub-sample periods (i.e. 1986-1991, 1991-1997, ... 0answers 150 views ### Measure how different forecasted volatility is from realized volatility Hi Quantitative Finance Stack Exchange, I'm looking for an opinion on a simple question. Suppose I use a Garch(1,1) model to make a volatility forecast. At time t, I have realized volatility \... 0answers 397 views ### Calculating volatility of inhomogeneous time series I am reading an article by Zumbach and Müller whose name is Operators on Inhomogeneous Time Series. This is interesting in general, but my main goal is to learn a good and efficient method to ... 0answers 310 views ### EUR/PLN and EUR/USD delta-term-vol surface quoting convension does anyone know for sure what is the FX market convension to quote delta-term pairs for EUR/PLN, for EUR/USD. I know that for EUR/PLN it should be delta p.a forward, for EUR/USD it should be delta ... 1answer 1k views ### How to compute the realised intraday volatility? I'm in the position to calculate a non-parametric volatility estimator for 15 and 30 minutes intervals of the SPY. I got data sampled on second resolution. However, I checked plenty of papers but, as ... 0answers 87 views ### Anyone know if this daily report discontinue to publish? Goldman Sachs - “Global Index Volatility and Correlation Monitor” I used to receive this daily report in my workplace from Goldman Sachs mailing list but the mailing list discontinued in May 2019 without any notice. The report is an pdf attachment which send from "... 0answers 199 views ### How to price the american options using local volatility I have given with a surface of american option prices C_{am}(T, K). From these american option prices the implied volatility surface is deduced. Now I want to find the local volatility \sigma(s,t)... 0answers 272 views ### Volatility of a stock basket to determine the volatility of a basket of stocks, I often use the following formula: \sigma_{basket}=\sum_{i}\sum_{j}w_i w_j \sigma_i \sigma_j \rho_{ij} where the \sigma are the constituents' ... 0answers 77 views ### Whats the big deal between volatility and the risk free rate? I am trying to understand asset price volatility. Many of the news articles I read link how stock market volatility is linked to asset price volatility? To give an example, in Mike Mackenzie's (... 0answers 77 views ### Spread in Option Quotes Let's take a look at market-maker's option quote in vol terms: 8.5 / 9.5. In that example bid-ask spread equals 1.0 point of vol. Can anybody clarifying how market-maker choose amount of spread in ... 0answers 133 views ### Realized volatility vs Fundamental volatility What is the difference between the realized volatility (also called historical volatility) and the fundamental volatility? 0answers 121 views ### Volatility Parametrization Libor Market Model - Underspecified Model? Does the volatility parametrization that I have chosen give an underspecified model? Which volatility parametrization in the Libor Market Model would suit the best for the particular case described ... 0answers 123 views ### How can a beginner trader make use of 'volatility of volatility' For a beginner option trader in equity options, how can he use this metric that is provided by his broker/data vendor? How can he use this metric to gain an added understanding of the option pricing/... 0answers 219 views ### Rolling window Kendall's tau against APARCH(1,1) correlation Assume you want to forecast the correlation matrix of a stocks' basket (say 15 ~ 20 stocks from different sectors); assume you need to forecast at T days because you will use the forecast ouput with ... 0answers 843 views ### Real time stock volatility Is there any need for real time weighted volatility on a tick by tick basis for equities? If you had that access to that, what could you do with it? 0answers 231 views ### What is the longest number of consecutive days that options implied volatility has stayed “extremely high” for any particular underlying? Curious as to whether or not there is any sort of all time record. Any index, future, or stock will do. Volatility must be well above the average 1 year volatility for all periods. 1answer 1k views ### Moving window forecasting in Python I am looking to create some code that will out-of-sample forecast the HAR-RV model. The model itself is formulated as the following, and the betas are estimated through HAC-OLS or Newey-West. ... 0answers 23 views ### Option Selection (rollover rules) in calculating intraday CBOE VIX (post 2014) In calculating the CBOE VIX (post 2014) one has to select near- and next-term options, which are defined as options with >23 days and <37 days to maturity. As time moves on, a currently selected ... 0answers 69 views ### Intuitive description of the Spillover Index by Diebold and Yilmaz I am struggling to grasp the steps outlined in the 2009 paper by Diebold & Yilmaz, which introduces the framework for a spillover index. The final expression for a spillover index for a two ... 0answers 85 views ### How rapidly should estimated volatility and volume change for estimating market impact in small markets? The cost of market impact is usually modeled as:$$ \Delta{P} = \delta \sigma (\frac{Q}{V})^{1/2}  Where: $\Delta{P}$ is the change in price of the asset caused by the transaction size $Q$ $\... 0answers 150 views ### Estimating daily volatility of unevenly/irregularly spaced time series data Say I have time-series data that is unevenly spaced, with anything between 4-50 hours of spacing in between. The data comes from a trading account history, which has captured the balance of the ... 0answers 190 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 ... 0answers 352 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: ... 0answers 376 views ### Why is Bachelier implied volatility more skewed than the Black-Scholes implied volatility? I found the following explanation in a paper by Grunspan (see attached paper page 6) but have trouble understanding it: By differentiating Formula (3) with respect to m, it turns out that the ... 0answers 152 views ### volatility term structure calibration As is well known in order to calibrate an interest rate model (i.e. hull-white, LMM) i need to use the current market yield curve and volatility. But in the case I want to calibrate the model in a ... 0answers 67 views ### Equity Options - “How do I build a forward simulation model with regards to shocks in spot pricing and IV?” I am trying to build a "What-If" Portfolio, consisting of a total of 20 options, across different tenors, strikes (delta), but on the same security. Simply put, the objective is for me to test the ... 0answers 255 views ### How do the units compare inside the (rate - 0.5*sigma-squared) correction? Usually, I find the units of the mean and the standard deviation of a distribution to be (quite obviously) the same. Can anyone come up with a really simple explanation (for MBA students, some of ... 0answers 230 views ### Variance swap “fast” models As far as I understand, Variance Swap (VS for short) function as follows : no payment when entering the contract at maturity the VS buyer pays a strike$K^2$and is paid (by the VS seller) the ... 0answers 5k views ### Historical volatility on bloomberg API Is there a way to obtain the historical volatility of a stock from the bloomberg API? I would be looking for the data in the HVT table. Actually 3-months historical volatility from now would be enough.... 0answers 216 views ### When to use SV or a GARCH model So i have been searching for this answer for a question if there is a rule or something that would say when to use GARCH type model or use an stochastic volatility model to predict the volatility of ... 0answers 178 views ### Derivation of variance of Zhou (1996) volatility estimator Does anyone know how to derive the Variance of Bin Zhou's volatility estimator (Theorem 1) in 'High-Frequency Data and Volatility in Foreign-Exchange Rates' (1996) Zhou 1996 Any help would be ... 0answers 663 views ### Reasoning for Bloomberg's short rate volatilty calculation Bloomberg, in its documentation, explains that it calculates the short rate volatility for its Hull White implementation by multiplying the e.g. 10y IRS rate (divided by 100) by the 10y cap vol. Why? ... 0answers 988 views ### Yield Curve Volatility Let you have several issuers, and let each issuer have its yield curve built up with liquid plain vanilla fixed rate bonds. Each yield curve has its slope and its curvature, and they obviously change ... 2answers 578 views ### Measuring unbiased estimator for variance with RMSE? The root mean squared error (RMSE) is considered by some to be the best measure of how good a variance estimate is. You often see it quoted as:$RMSE=\sqrt{\frac{1}{n}\sum_{i=1}^n(\hat{\sigma_i} - \...
88 views

Why does dividing daily returns by daily range eliminates fat tails and results in an (almost) gaussian distribution? And how could that distribution be exploited to enter trades?
140 views

### What is the relation between return volatility and return rank volatility, and how can I control the latter?

I have no experience in finance, but I've been playing around with a virtual portfolio. I'm trying to control the "rank volatility" distribution - that is, the volatility of a stock's daily rank in ...
625 views

### How to adapt a Moving Average period to market conditions?

I would like to know if there is some way to adapt the period of a moving average to market conditions like for instance the stop loss can be adapted to market conditions using the average true range. ...
62 views

### Why are some currency pairs more volatile than others?

Why for example GBP/JPY is twice volatile as USD/JPY ? ... and many more cases involving other major forex pairs here: full list. thanks in advance!
75 views

### Can variance change over time?

I'm working on a toy project that involves fantasy basketball, I know this is the quantitative finance stackexchange, but it seemed like the best place to ask this question. My goal is to make ...
62 views

### Local volatility Formula and How To use it

I'm new to Volatility Modelling, so the content of this question may be completely wrong and th question naive. I'm reading "The volatility surface" by Gatheral. I'm trying to get a sense of the first ...
31 views

### TSRV parameters selection

I'm thinking about how to select the $J$, and particularly, $K$ parameters for the Two Scale Realized Volatility estimation? I cannot find any reference for that in the original paper - there it says \$...
38 views

### HAR-RV model for predicting 1-min volatility

I would like to use HAR-RV model (Heterogenous AutoRegressive - Realized Volatility) to predict a 1 minute realised volatility using the HAR model. As regressors I intend to use RV of previous minute, ...