# 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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### 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 ...
440 views

### Uncertain volatility

Recently, I have encountered something called "uncertain volatility". Is it a popular concept in QF? Do practitioners use it nowadays? What are its pros and cons compared to e.g more familiar ...
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### Local volatility and Stochastic Volatility

Please help me understand similarity and differences between local volatility and Stochastic Volatility both intuitively and mathematically.
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### Fair Strike for Variance Swap with no Skew in IV Surface

I am reading through Derman's 1999 research notes, "More than you ever wanted to know about Volatility Swaps." In equation B4 of Appendix B, the author takes the Taylor Series of the variance swap ...
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### How to correctly simulate volatility shocks?

I am working on the comparison of different volatility timing/target strategies on portfolios starting from different conditions (data, asset classes, calculation of realized volatility, different ...
341 views

### How to determine the risk-neutral measure in a Heston model?

To clarify, I'm quite familiar with the risk-neutral pricing framework, and I know one can efficiently Monte-Carlo a Heston model via the non-central $\chi^2$ distribution approach. But so far we're ...
308 views

### Best topics to begin Quantitative Finance Research/Programming

I have a background in mathematics (Functional Analysis and Probability Theory) and am looking to acquaint myself with research in quantitative finance, particularly with a programming component. ...
5k views

### How to normalize different instruments by volatility?

I'm trying to think on a way to normalize stocks to be on the same scale depending on their recent volatility. Is there some theoretical reference on the subject or and experience you can share?
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### What is the intuition behind “jumps” causing volatility skew?

Some models use jumps as a way to explain volatility skew. I understand that if jumps exist, then you are "mishedged" as you no longer can continuously hedge. Options have a gamma component and ...
106 views

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### Estimating at-the-money volatility where at-the-money option is absent from the market

I am trying to estimate the intraday ATM volatility in a market where the the strike prices are relatively sparse thus the ATM option may not exist (let's say the closest strike is about 2% away from ...
101 views

### Convert volatility to yield

I have an elementary bond volatility math question - if 5y black vol is 38 and normal vol is 68, and the yield is 1.85%, how do I calculate 1 stdev in yield terms? As in how many basis points (or ...
568 views

### Volatility surface for Swaptions

I understand the volatility surface for swaption is built using implied vols of ATM swaptions. I had a question on the instruments that are used. Should the instruments used change depending on the ...