Questions tagged [volatility]

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

Filter by
Sorted by
Tagged with
0
votes
0answers
50 views

Where can I find a source that futures traders use ATR and stock traders use log price ratio standard deviation to calculate volatility?

In the wikipedia article about the average true range, I can find the following statement: Since true range and ATR are calculated by subtracting prices, the volatility they compute does not change ...
0
votes
2answers
122 views

comparing volatility and correlation over time

I'm trying to figure out if some emerging markets change over time. First of all I am going to check for changes in volatility. What would be a good method to do this. And do you suggest comparing ...
2
votes
2answers
210 views

Probability of an Option maturing In-the-money vs. Volatility

How will the probability of an option ending up in the money change if the volatility of the underlying stock increases? Intuitively, I think the answer to this is that if volatility goes up the ...
-2
votes
0answers
52 views

How is Volatility Box calculated?

https://www.youtube.com/watch?v=-_d6wkNV-AI I see this indicator. But I don't find a math definition of it. Could anybody show me how it is defined exactly? Thanks.
1
vote
0answers
34 views

How to measure accuracy of SABR volatility surfaces?

I would like to test how accurate are SABR volatility surfaces with respect to historical volatility over a given time period and for a specific equity index. Reading a few papers I realised that one ...
1
vote
1answer
72 views

Autocallables under LSV

I’m looking at prices of Autocallables under Local vs. Local-Stochastic volatility. The stochastic part of my LSV model is driven by the Heston model. Increasing the volatility of variance parameter ...
0
votes
1answer
108 views

Difference of polynomial interpolation for volatility smile

I am using 5 volatility points to build a volatility smile : put 10D, put 25D, ATMF, call 25D and call 10D. I have thus 5 pairs of data : (Delta, Vol) let's say for example (10;5.75) ; (25; 5.50) ; (...
0
votes
0answers
32 views

Industry standards for vol control index options

Consider an index of the type: $I(t)/I(t-1) = 1+ a(t) (S(t)/S(t-1)-1)+(1-a(t))r(t-(t-1))$ It is arbitrarily initialized. $r$ is the risk free rate. a(t) is determined piecewise as: $a(t)=s_{target}/s_{...
1
vote
1answer
125 views

using bid ask prices to imply bid ask volatilities

Let's say i have bid / ask feed of an option prices (across strikes and expiries, calls and puts), what is the accurate way of implying out vols from these bid / asks For eg; to get the bid vol, ...
-4
votes
1answer
47 views

Sharpe Ratio of a Long-Short Portfolio

I have a portfolio High and Low (according to the highest profit). From this I have formed my long short portfolio and calculated my Sharpe Ratio. How to interpret this correctly? Does a positive ...
3
votes
4answers
4k views

Value of Call Option as Volatility goes to Infinity

Why would the value of a call option go infinity as volatility goes to infinity? I understand how you could solve this question by taking $\sigma \rightarrow \infty$ in the solution to the black ...
5
votes
2answers
1k views

If the volatility of pounds/euros = .2 do we know anything about the volatility of euros/pounds?

I think the question here is what we know about $\mathrm{Var}\left(\frac1X\right)$. Is this the right question to ask, and if so is there anything that can be said?
0
votes
1answer
468 views

How to obtain one-step ahead forecast in Python based on GARCH?

I am trying to produce one-step ahead forecast using GARCH in Python using a fixed windows method. I ultimately want to put the code below in a for loop, but this code snippet does not perform as I ...
0
votes
0answers
47 views

Volatility targeting / sizing for option strategies

I am trying to work out how to properly size an option strategy to a given target volatility. Assuming I have \$100 capital and I would like to have a strategy's long-run daily volatility to be \$1 (e....
0
votes
1answer
179 views

Interpretation conditional volatility plot

I have plotten the log differences of exchange rates and in the same plot, I show the conditional volatility $\sigma_t^2$. The conditional volatility follows approximately the same path, but is much ...
2
votes
1answer
276 views

Relation between Parkinson number and historical volatility

In his book 'Dynamic Hedging', Nassim Taleb gives the relation: P = 1.67*historical volatility, where P is the Parkinson number. What is the basis of this relationship. Does this hold under special ...
0
votes
1answer
132 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 ...
0
votes
0answers
52 views

Construction of vol term structure for Libor

When we want to construct Interest rate term structure we look at various market instruments like futures, swaps etc. and using ...
1
vote
2answers
142 views

GARCH(1,1) parameter estimation optimization method

In estimating a GARCH(1,1) model, $$\sigma_{t+1}^2 = \omega+\alpha \epsilon_t^2+\beta\sigma_t^2$$ Usually the parameter tuple $(\omega,\alpha,\beta)$ is estimated by the quasi-maximal likelihood. ...
0
votes
1answer
66 views

GARCH parameter estimation by linear regression?

In estimating a GARCH(1,1) model, $$\sigma_{t+1}^2 = \omega+\alpha \epsilon_t^2+\beta\sigma_t^2$$ Usually the parameter tuple $(\omega,\alpha,\beta)$ is estimated by the quasi-maximal likelihood$. Can ...
0
votes
0answers
47 views

Ito's lemma results in negative volatility processes

I struggle with the interpretation of a process I derive from Ito's Lemma. Let's say I have function f(S,t) which is twice differentiable wrt S. I thus can apply Ito's Lemma to get $df(S,t)$. So far ...
2
votes
1answer
111 views

GARCH calibration with overlapping time intervals

In constructing a GARCH(1,1) model over a time length $\delta$, I am considering the following procedure. The purpose of this procedure is to give more training (calibrating) samples than non-...
0
votes
0answers
65 views

Realized Volatility + GARCH - can I use hourly realized volatility?

I hav minute bar FX data and I am trying to fit a realized variance GARCH model using rugarch. This normally works by providing daily returns and daily realized volatility to the model. Realized ...
6
votes
2answers
1k views

Volatility swap hedge

What are the hedging methods for volatility swap (rather than variance swap)? What are the possibilities of setting up a static, semi-static or dynamic hedging? I am aware of but have not yet read ...
0
votes
2answers
160 views

Where can I find caplet implied volatility data?

I am looking for caplet implied volatility data for Libor-EUR. Is there any online data base etc. available to get such data? Does ...
2
votes
1answer
221 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) ...
20
votes
7answers
5k views

Looking for a recommendation for a real life volatily trading book.

Recently I started working in an algotrading company as a programmer. After I studied that subject a little in the university and read a book or two in that field I gained a little knowledge in that ...
0
votes
3answers
126 views

Hedge performance in times of volatility: Beta changes impacting PnL during market rebound

I hedge a portfolio of Global Equities (200 stocks within MSCI World universe) by shorting futures on MSCI World Net Total Return. The hedge is calculated using Beta. Beta is calculated using a risk ...
0
votes
0answers
40 views

QuantlibXL - How can I define a volatility surface using moneyness instate of strikes?

I wonder if in the function qlBlackVarianceSurface() I can replace the strikes for moneyness and then price the option using the spot = 100% and the option strike = Original_Strike / Original_Spot. ...
0
votes
1answer
174 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 ...
0
votes
2answers
111 views

Annualised returns and volatility for 3 month data

I have a portofolio with 30 indexes and I want to calculate the annulised returns and volatility because I want to compare it with another portofolio with different number of indexes (but same time ...
9
votes
4answers
19k views

What does it mean to be “long or short in volatility”?

I've heard a question regarding pricing of european calls. The question is: Is the call long or short in volatility when it is (deep) OTM? What is the profile of the implied volatility? I know ...
3
votes
1answer
130 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 $...
1
vote
1answer
96 views

Free Arbitrage conditions in ATM swaption surfaces

I'm wondering how can we check free arbitrage conditions in ATM swaptions surfaces since we only have access to Expiry, Tenor and volatility? Can someone help me please, i didn't find any article ...
1
vote
1answer
239 views

Realized Variance (realized volatility)

I'm confused about realized variance. I roughly know the theory around Ito Calculus and quadratic variation and integrated volatility so I understand what realized variance measures (even though as ...
1
vote
1answer
58 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 ...
3
votes
0answers
125 views

Contribution to Mahalanobis Distance

I am using Mahalanobis Distance to measure abnormal behavior within a portfolio consisting of a handful of general asset types, and am trying to figure out how to decompose this measurement into ...
0
votes
0answers
38 views

Delta hedge analysis - volatility rapidly growing

I'm working with a hedge expirement design, where I daily hedge with EGARCH(1,1) forecasted volatilty based on a moving evaluation of the past 126 days. However, I can't seem to understand the profit ...
0
votes
0answers
26 views

Perfect in-sample size for out-sampling volatility prediction (EGARCH(1,1)

I have a few questions regarding in-sample size for volatility forecasting in EGARCH(1,1). I'm currently sitting with a dataset consisting of 1387 trading days of the S&P-500 index. I would like ...
1
vote
0answers
28 views

How to estimate lambda from NAGARCH submodel in R

I am trying to estimate the model="fGARCH", submodel="NAGARCH" from the rugarch package in R. However, when I am estimating the parameters, only omega, alpha, beta and gamma are ...
0
votes
0answers
62 views

Intraday volatility pattern of Emini

I have the series of 1-min logarithmic returns of Emini future from 2007 to 2020 I calculated the standard deviation of each return at a fixed time of day and then I plotted the results (see image). I ...
3
votes
1answer
336 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 ...
0
votes
1answer
155 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 ...
1
vote
0answers
29 views

Calculating E^2[σ^2] where σ is a GARCH(1,1) Proces

Given that α =0,113079 β = 0,873884 ω = 0,0000081 Need the calculate a call price using garch volatility I alsa calculated the kurtosis = 235 enter image description here: https://www.researchgate.net/...
1
vote
1answer
87 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 ...
3
votes
2answers
177 views

Confidence Intervals for ARMA+GARCH forecasts

I have fitted an ARMA(1,1)+GARCH(1,1) model to my logreturns series. When it comes to my standarized error's distribution however, I have opted for a Skewed Generalized Error Distribution, because of ...
3
votes
1answer
240 views

Market price versus theoretical price of varswaps

When I traded varswaps several years ago, for some indices there was a significant mismatch between market price and theoretical price. The theoretical price assumes continuous monitoring and infinite ...
0
votes
0answers
35 views

Realized volatility calculations from real dataset

I am working with a dataset from: http://web.math.ku.dk/~rolf/Svend/ named data 1. I'm currently setting up a delta hedge for periods of 3 months. So currently we are starting at the start data of the ...
12
votes
9answers
2k views

Why is asset volatility easier to estimate than the asset mean if it contains the mean?

It is well known that the variance of asset returns, $\sigma^2$ (whose square root is volatility), is easier to estimate than the asset mean $\mu$ (also known as expected return) because the mean of ...
2
votes
0answers
85 views

Skewness and Kurtosis in GARCH vs Heston

GARCH(1,1) In discrete time, we can model returns as follows \begin{align} r_t &= \mu + \sigma_t\epsilon_t\\ \sigma_t^2 &= \omega + \alpha \epsilon_{t-1}^2 + \beta\sigma_{t-1}^2 \end{align} ...

1
2 3 4 5
22