Questions tagged [volatility]

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

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20 views

Durrleman's versus Ledoit & Santa-Clara's proof that short time to maturity limit of ATM IV is instantaneous vol

As far as I know there are at least two (perhaps more) proofs that under certain technical conditions the short time to maturity limit of the ATM implied vol is the instantaneous vol. There is the ...
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204 views

About BDP formula on getting Volatility of stocks from Bloomberg

I have tried VOLATILITY_90D to get the VOLATILITY of stocks from Bloomberg in excel. However, I found that I cannot get the VOLATILITY of some Stocks,such as 330 HK, 3800 HK. Could anyone help me to ...
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Computing the average deviation range in a mean reverting series

Given a mean reverting time series, what's the appropriate measure to use to compute the range it deviates by before reversion? Assuming normal distribution, taking standard deviations of the actual ...
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75 views

Annualization of discrete returns

There is a well known approach to annualize volatility of log-returns for a given frequency. Let $P(t)$ a price process and define a log return $r_l(t)$ as $$r_l(t) = \ln \left( \frac{P(t)}{P(t-1)} \...
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60 views

Significance of annualized volatility over 100% on the normal distribution? [closed]

Assume stock is 50 dollars. From what I understand, an annualized vol of 20% means there is a ~68% chance the stock will be between 40 and 60 a year from now; a ~95% chance it will be between 30 and ...
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Understanding Yang-Zhang Volatility Estimator

I am using TTR in R and I am trying to understand the Yang Zhang volatility estimator (without drift). The following equations seem to imply a single value: $$ \sigma = \sqrt{{\sigma_o^2}+k\sigma_c^2+...
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how should i interpret the gjr-garch output where the gamma coefficient comes positives but insignificant?

i run gjrgarch model on russia stock market where the gamma coefficient in gjrgarch(1,1) model output is insignificant but positive. "gamma1 -0.026240 0.033785 -0.77669 0.437340" how ...
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70 views

Eurodollar futures volatility

Considering each point is 2500, how can I get the volatility of the jun 24 contract? On tastyworks I'm seeing a 0.7% iv for the contract, how can I translate it to standard deviation? Ex:sp500 15%...
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Calculating DV01 of a swaption

Given a certain option price (premium) and implied volatility, how does one calculate the DV01 of a swaption? Is there any way to compute it analytically with Python?
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Trailing stop (long-only) based on annualized volatilty

I am wondering if there is a rule-of-thumb for setting a trailing stop (fixed percent) if you know the annualized volatity. I calculate volatility from daily close price using the simple returns, $...
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57 views

returns, standard deviation and mean absolute deviation

I'm trying to understand the relationships between return, standard deviation and mean absolute deviation. I saw someone mention: $daily return * 16 \approx annualized volatility$ $weekly return * 7.2 ...
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231 views

In-sample volatility measurement

I would like to know what is the most reasonable way to measure volatility in a sample of past observations. Aside from standard deviation, are more complex models like GARCH used for (historical) ...
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260 views

Fitting a volatility smile with pySABR -- Python implementation of SABR model

In order to model some volatility smiles I'm using the python's pySABR package. I ran into a situation when I have two almost identical pieces of code for two different volatility smiles missing the ...
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Where to find retail trading volume data?

I have plans to work on a paper to study a possible correlation between fluctuations (volatility) in the European and American markets with retail trading activity, either dollar and/or ticket volume. ...
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74 views

is implied volatility derived from the option bid quote or the option ask quote?

I got SPX option prices from three different market data sources. In all of them, I can see bid and ask quotes. However, there is only one implied volatility. Does this implied volatility correspond ...
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134 views

Rogers Satchell Volatility

I am trying to implement Roger Satchell volatility in Go, but my results do not match reality... I have been at this all day, but cannot find my error. The 30 day Rogers Satchell vol is at 8.75%, but ...
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62 views

Why calibrate vol based on consensus?

I am starting to work on building vol surfaces using implied vols on the short run mixed up with consensus vols ran through a whole bunch of interpolation/calibration/smoothing process. Although I ...
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201 views

GARCH Model Estimation with Standard Deviation

I want to examine exchange rate volatility on Stock Returns. Please, if I Generate Exchange rate volatility (ER_vol)using standard deviations approach, can I include the (ER_vol) as a regressor in the ...
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112 views

Data source for FX options

I have daily quotes for the new york and london fixings of fx options on EURUSD. I can choose between two sources: BGN and CMPN. Apparently these are based on slightly different methods of aggregating ...
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Volatility basics: what happens to implied volatility of stock in week of earnings and dividend payment?

Question: Imagine it is a Monday. Company A (stock you are following) has an upcoming dividend payment on Wednesday and an earnings announcement on Thursday. Company A stock is currently trading at \$...
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Infill lower frequency data: Brownian Bridge

Given monthly returns data, I would like to infill those to get daily returns. Roughly estimates imply that annual volatility is about 1.5x of SPY. One option that came up in my initial research was ...
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171 views

Mathematical solution to return decay of daily leveraged products (leveraged ETFs)

Daily leveraged ETFs have an inherent path dependence. An index performing (5%, -5%, 5%) on 3 days has an overall performance of 2.9%. A -1x leveraged ETF would perform -3.1%. At a higher volatility, ...
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CMS cap has more vega exposure than CMS floor for same strike

When I priced a 10y expiry single look CMS30 ATMF CAP, I noticed that the vega exposure is higher than that of the same 10y expiry single look CMS30 ATMF FLOOR. Why is that? I have a suspicion that it ...
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Mixed local-stochastic volatility model in Quantlib

At a conference the speaker mentioned that it is a standard approach today to use a mix of local and stochastic volatility model in equity, FX and interest rates. Can you please suggest the most ...
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65 views

High Beta, low specific risk, and no leverage?

My risk model shows a Beta of 2 for the stock APTIV (maker of car components). The model looks at the past 3 years with no decay. Total vol is high but specific vol is very low. Typically when this ...
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Fitting ARIMA + GARCH in R

I'm forecasting Electricity consumption Data. I have data for one year , so for every 15 minutes there is an observation. My data contains seasonality and I don't know how to fit SARIMA + GARCH into R,...
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376 views

Expected Delta hedging frequency as function of implied (and realized) volatility

I'm looking for a proxy (or some rule of thumb) that can create a link between the implied volatility, the realized volatility and the frequency of Delta hedging required to keep the Delta as close as ...
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191 views

Calculating Daily Realized Variance with Non-Constant Sampling

I was able to obtain some tick data on a particular asset and I wanted to calculate the daily realized variance of the asset. After browsing through a few threads here, it seems the formula to ...
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Does my caplet stripped volatility surface make any sense?

My goal is to build a volatility surface for caps on a 3M index implied from SABR model. I have a set of cap normal volatilities for a range of strikes (4%, 6%, 8%, 10% and ATM) and maturities (1, 2, ...
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58 views

Yield curve steepening/flattening using different duration treasury futures (TUT Spread) and volatility

Yield curve steepening: long 2 contracts 2 year (2 contracts due to contract size), short 1 contract 10 year Vice versa for flattening. If the 2 year note has a expected volatility of 2% per contract (...
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102 views

Looking for a good introduction to modelling ARCH-type models

I am starting to think about my dissertation topic for my undergraduate degree. I am interested in comparing volatility of stock indices during COVID-19 to the years leading up to the pandemic. I have ...
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74 views

Spot-Vol covariance and risk reversals

I have been looking into the covariance between log spot returns and log IV returns over a variety of tenors and lookback windows. However I am not sure how these numbers relate back to the outright ...
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53 views

sizing fx futures trades by targeting volatility

If I lever up a JPY/USD futures with a 6% volatility/contract 2x to meet my 12% volatility target, how many contracts should I buy per $100,000 I have in liquidity? How do I size my position based on ...
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273 views

VXX Put pricing

Last week at Friday's close, the Dec 14 37.5 Put options were selling for \$.68 with VXX at \$40.29. This week at Friday's close, the Dec 21 37.5 Put options were selling for \$.38 with VXX at \$40.50....
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102 views

VaR using normal vol vS lognormal

We are using a vendor's software to calculate the Parametric VaR (using RiskMetrics approach) that take as input the volatility figure of the risk factors. The volatility used so far was the lognormal....
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169 views

Understanding out-of-sample performance metrics for Realized Volatility

I fitted several models on a realized volatility process and then proceeded to obtain out-of-sample results. I'm struggling to interpret these results apart from to tell model A seems better than ...
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Are there any public implementations of realized kernels? (preferably in Python)

looking to implement a realized kernel model to forecast realized variance of around ~140 equities and indices in Python given order book data. I have read "Realised Kernels in Practice: Trades ...
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Charting Annual Volatility From Start Date In a Line Plot

I'm pretty new to python/data viz and this is my first time asking a question on here but I have a df with monthly price data back to 2016 for 6 different instruments. I just want to be able to ...
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239 views

Vol, Gamma, Vega -- essentially all the same?

When talking to traders I hear this sentence a lot I am a buyer/seller of X where X = {vol, gamma, vega} Is X basically all the same -- they are just saying -- I think implied volatility is cheap or ...
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Reduced volatility in local stochastic volatility model

in Local Stochastic Volatility models I always read or hear "first the stochastic volatility model is calibrated to reduced vols and then the local volatility model corrects it" also I head ...
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298 views

Autocall Calibration

I'm trying to price autocalls. In theory my pricing method is ok (I followed Bouzoubaa's book procedure) but I'm not sure I read anything on calibration of autocalls. Basically my question is what ...
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52 views

Using converted lognormal volatilities for negative rates in a lognormal Libor Market Model (LMM)

There exist formulas to convert between normal and lognormal interest rate volatilities. In the most simple form the approximation for ATM volatilities would be $\sigma_{LogNorm}=\frac{\sigma_{Norm}}{\...
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What is Nassim Taleb's Stance on Volatility

Over the years I have read all of Taleb's Incerto. I recall him more or less writing that "stock returns have no second moment". Hence stock volatilities, defined via the standard deviation ...
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104 views

annualized vs annual returns

For the purposes of MPT, to compute return of an asset, one typically uses the daily log return of the assets and then anualizes it and the same goes for stddev ...
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665 views

Does your Parkinson volatility ratio work as Taleb explained?

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}\...
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233 views

Extrapolate Implied Volatility Surface

I have a moneynessratio-tenor volatility surface and want to extrapolate the implied volatility for moneynessratios > 150%. The volatility surface was downloaded for different points in time, so I ...
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348 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 ...
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53 views

Rationale for Historical Volatility definition

I think I understand the most common definition for historical volatility (standard deviation of log returns), but it has me puzzled because it conflicts with my intuitive idea of what volatility is. ...
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Maximum market volatility

I program trading algorithms that create profits from unpredictable market fluctuations. I am looking for markets with the most extreme fluctuations and I need them to fluctuate up and down in a zig-...
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207 views

Realised variance under simple rough volatility model

Using the Mandelbrot-Vann Ness representation of fractional Brownian motion in terms of Wiener integrals, increments of the logarithm of realized variance $v = \sigma^{2}$, under the physical measure $...

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