# 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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### What is the model behind Heston-Nandi functions in the fOptions R package?

I am dealing with Heston model in R and for this purpose I am using the package fOptions from RMetrics. The calibration formula requires the specification of some parameters (omega, lamda, alpha, ...
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### 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' ...
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### How could one trade volatility skew if you think it's too flat or steep?

We all know that you can trade on a forecast of volatility by dynamically hedging, but I'm wondering if there's a similar technique where in you can trade the skew specifically? Let's say you travel ...
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### Pricing forward start Cliquet option with implied volatility with Dupire

I have the following implied volatility matrix of a stock index downloaded the 15th February 2019, the value of the stock was 3188.44 at the time: ...
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### How is volatility different from variance?

I always thought volatility was just variance ^ (1/2). Now I'm reading this book and it's saying that the two are different concepts. Excerpts include: Partly due to its use in Black-Scholes, ...
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### What are the different indicators to measure historical volatility for stocks on individual basis?

Google search shows there are three indicators to measure volatility: 1. Average True Range 2. Standard Deviation / Variance 3. Bollinger Bands. What are the indicator(s) that you use to identify ...
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### Vanilla Option Prices from Local Vol Surface (using neither MC nor PDE)

There are numerous papers that describe the derivation of the Local-Vol equation using available market prices of options. For example: Dupire's formula (see e.g. OpenGamma (2013)) gives us LV in ...
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### 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 (...
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### Volatiliy in a at-the-time call option [duplicate]

I understand that the vega of the Black-Scholes equation is a positive function, which means the value of the option is an INCREASING function of the volatility, since vega is the derivative of the ...
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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}\... 2answers 748 views ### What is the formula for Intraday and overnight volatility? I'm a noob trying to calculate IntraDay and Overnight Volatility. For Intraday volatility we can get the annualization factor with the following: Length (hours, Open to Close): 6.5 Time frames per ... 0answers 65 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 311 views ### Rolling forecast using GARCH model EDIT This is not a duplicate of my original question linked, since I have since overcome that problem and have posted an answer. Since solving the previous problem, I have run into the problem ... 1answer 303 views ### 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 ... 2answers 390 views ### Proof of approximation formulas for implied volatilities I am trying to calibrate a local volatility model to observed implied volatility smiles (not surfaces!, just a smile given for fixed maturity). I ran into the following approximation, and thought I ... 0answers 63 views ### Estimating an GARCH(1,1) model? Long hand method I am really trying to invest some time to estimate a GARCH(1,1) method, I know there is many statistical packages that will do this for me (Eviews, MATLAB, R), but I am trying to do this by hand, so ... 1answer 60 views ### In search of nice (approx) function forms of the volatility of cumulative simple returns Let's consider a period t\in[0,T], and let the simple return over year t (1\le t\le T) be r_t. Assume r_t are iid normal. The cumualative simple return over the whole period [0,T] is$$R_T=...
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 $Q$ \$\...