# 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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### How skewed are FX returns? Does this look like a plausible histogram of EURUSD?

I'm reading about volatility. I've charted the histogram of EURUSD and I am wondering if this looks plausible? What I've charted are the 1-hour percent change returns (not log returns). I've removed 0 ...
79 views

### Correct terminology - estimate or model?

I am doing some academic work and I'd like to summarise the picture around volatility models. As such, I'd like to refer to several ways of estimating volatility and I'd like to use proper terminology....
181 views

### Negative Density in Local Stochastic Volatility (LSV) Model Calibration

I'm trying to calibrate Local stochastic volatility model using finite difference method, and I'm mainly following this referece: Tian (2015). I met a problem when calibrating leverage function - the ...
45 views

### Volatility for options pricing: fixed window or match maturity?

When calculating the volatility or covariance matrix of stock returns for the purpose of pricing a vanilla option on an underlying, it is difficult to choose the window over which the volatility ...
132 views

### forward variances under rough bergomi

I have seen in several papers on rough volatility using the following expression for the forward variances $$d\xi_t(u) = \xi_t(u) \eta \sqrt{2H} (u-t)^{H-1/2}dW_t$$ Can anyone explain to me how this ...
189 views

### Implementing a Variance Swap Hedging in R

I am trying to compute a hedge for a variance swap, in a simulation. Fo that I am using the following equation:\begin{align*} E^Q\bigg(\sum_{i=1}^n \bigg(\frac{S_{t_{i}}-S_{t_{i-1}}}{S_{t_{i-1}}}\bigg)...
83 views

### Understanding GARCH

I asked this on stats.stackexchange but I realized this might be a better place to ask this question. I am new to finance and volatility forecasting and am trying to understand how garch model works. ...
184 views

### Stochastic Volatility Models - are they complete markets?

I'm reading about stochastic volatility models - the ones which resulted after Wiggins proposed in 1986/7 that $\sigma$ in Black-Scholes should be a stochastic process rather than a constant. In ...
27 views

### How does one obtain a realistic range for the VIX using its volatility if it is at its multi-year low?

Suppose the VIX index is at a hypothetical multi-year low of 15, yet the volatility of VIX has a reading of 100. If one were to surmise from this volatility of VIX a range for the VIX over the coming ...
22k views

### What is the "leverage effect" for stocks?

I've read the so-called "leverage-effect" for stocks models the fact that if a company is leveraged, its volatility should increase as the stock price moves lower and closer to the level of debt. Can ...
38 views

### The put-call parity have to be fulfilled by an asian option

Coming from here: https://quant.stackexchange.com/a/7616/43679 we have that for a European option, and due to the put-call parity, due to the non arbitrage rule, the volatility for a put and a call ...
107 views

### Short the difference between implied volatility and realized volatility of SPX

A professional trader said that the way is not to short VIX or other volatility products, but to short the difference between implied volatility and realized volatility of SPX This has to do with VRP ...
22 views

### Adjusting derived volatiles using skew

Once we obtain a prediction for the future volatility using (GARCH, HARQ, etc), do we have to adjust the implied volatility dependent on the strike price. How would we incorporate a skew versus a ...
56 views

### Black Standard Deviation in QuantLibXL

I was having a doubt about a fucntion in the QuantLib add-on for excel. What is the formula for the function: qlBlackFormulaImpliedStdDev(...) I know that there ...
6k views

### Effect of volatility on the delta of a call option

In the book 'Dynamic Hedging', Nassim Taleb writes: ...
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### Converting Historical Volatility to Implied Move

I am trying to calculate an implied one-day move value for an instrument given its historical volatility. While I am familiar with this formula for implied volatility to implied move: and intuition ...
9k views

### Volatility pumping in practice

The fascinating thing about volatility pumping (or optimal growth portfolio, see e.g. here) is that here volatility is not the same as risk, rather it represents opportunity. Additionally it is a ...
140 views

### How to properly annualize portfolio volatility

I have a portfolio consisting of several assets and I'm using daily data to calculate various portfolio metrics, including historical returns and volatility. In order to compare portfolio performance ...
49 views

### Multiple Indices for CAPM model [closed]

I am new to quantitative finance so, please excuse me if the terms are not correct. I am trying to apply CAPM on a portfolio which has multiple indices (S&P 500, Russel 1000 and S&P Financials)...
748 views

### Do the weights of the exponentially weighted moving average (EWMA) have to sum to 1?

I am currently trying to calculate a volatility by using the EWMA model because it is said to yield better results than just using an equal weighted calculation approach. However I am a bit confused ...
26 views

### open-close intraday demeaned log return calculation

open-close return is basically what I feed into the realized kernel volatility and recently I noticed the realized kernel covariance/variance is generating negative value so I had to retrace my ...
56 views

### Log Moneyness vs Log Strike

In How to calibrate a volatility surface using SVI, is said: "(log-moneyness would be more accurate) ". First, why do we talk about "moneyness", is it a reference of "being in ...
68 views

### weekly returns and the daily returns scaled to weekly

I am new in this blog and first of all I want to apologise for my english. I have to calculate, for a university project, the weekly returns and daily scaled returns to weekly for few stocks For ...
56 views