# 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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### Variance replication using options

I would like to understand the intuition behind the following question: Why a certain weighted sum of prices of put and calls is equivalent to the implied variance of an underlying? A variance swap ...
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### How to calculate historical intraday volatility?

Sorry for what must be a beginner question, but when I went to write code I realized I didn't understand exactly how historical volatility, or statistical volatility, is defined. Wikipedia tells me "...
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### Transition Between Volatility Regimes

Emanuel Derman wrote a great paper in 1999 about volatility regimes and the adjustments the market makes during these periods (sticky strike, sticky implied tree, sticky delta, etc). Has any ...
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### Intuitive Explanation for Volatility Smile for Equity

I am trying to understand the intuitive reasoning for why volatility is more for deep OTM/ITM put/call then ATM..(why Simles for equity) Why ATM will not have more volatility as deep OTM/ITM option ...
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### What is the equation for Garman-Klass volatility?

I want to calculate realized/historical volatility for the underlying products of various options using the Garman-Klass estimator, but I can't see to find an equation, although I know it involves ...
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### volatility input for black scholes formula

I am not a mathematician but want to try and understand the BS model for option pricing. I get the intuitive sense of it but am unable to figure out calculation of volatility (as an input). Some ...
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### Estimating implied volatility of an index component with no vanilla options market

There are liquid vanilla options trading on an index of 20 equity components. The question is how to price an option on one of the index components, knowing that there are no options trading on that ...
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### Is this the correct way to forecast stock price volatility using GARCH

I am attempting to make a forecast of a stock's volatility some time into the future (say 90 days). It seems that GARCH is a traditionally used model for this. I have implemented this below using ...
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### Derivation of VIX Formula

I've read a lot of derivations about VIX formula. I can say it is -adjusted- fair strike of variance swap. But I can't see how it goes from variance swap rate to VIX formula. In particular I can't see ...
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### target market correlation for long / short equity portfolio

Given a long / short equity portfolio, I want to have some net long market exposure. My portfolio volatility is fixed to a target, so I don't think it makes sense to target market beta. I think I ...
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### Why is $dS/S$ an estimate of realized volatility?

For one period, $dS/S$ is an estimate of realized volatility, which we can annualize by dividing with $\sqrt{\Delta t}$. But.... why? How is $dS/S$ an estimate of volatility? Volatility is, to me, ...
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### Effect of volatility on the delta of a call option

In the book 'Dynamic Hedging', Nassim Taleb writes: ...
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### pricing using dupire local volatility model

I am reading about Dupire local volatility model and have a rough idea of the derivation. But I can't reconcile the local volatility surface to pricing using geometric brownian motion process. If I'm ...
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### 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 ...
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### Paradox in option expiry as volatility goes to infinity

As volatility goes to infinity, the delta of a call option goes to 1. The delta approximates the probability that the option expires in the money. So it seems that the probability of expiring in the ...
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### Volatility swaps historical data

I am preparing a study about Volatility and Variance Swaps. Does anyone know where I can found historical public data regarding this instruments? Thanks!
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### Why do stocks with high sensitivities to innovations in volatility have low average returns?

Ang, Xing and Zhang (2006) state that "stocks with high sensitivities to innovations in aggregate volatility have low average returns". I am familiar that this question has been asked before in ...
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### GARCH model using high frequency price return

I would like to forecast variance at time length $k\delta$ based on a price (return) time series of time step length $\delta$. I will apply a GARCH(1,1) model to subsamples at time intervals length \$k\...
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Does the volatility of a Currency Pair depend on the currency in which the premium is paid? For example- will the Volatility of USDJPY change if the premium is paid in USD instead of JPY. Is there any ...
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### Is there a HAR that deals with the leverage effect?

The EGARCH is a special GARCH model that treats the leverage effect of the volatility. The HARV does not make a distinction between negative and positive returns. Is there a special HARV that deals ...
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### Correctly applying GARCH in Python

Problem: Correct usage of GARCH(1,1) Aim of research: Forecasting volatility/variance. Tools used: Python Instrument: SPX (specifically adjusted close prices) Reference material: On Estimation of ...
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### Regime-Switching Model for detecting market shifts

I'm always wondering whether anyone has utilized regime-switching models successfully in forecasting or trading. Academia has long discussed this topic in-depth, such as using Regime Switching ...