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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15 views

PRIIP Stressed Volca Calculation

Hello dear Finance mates, i have a question regarding the calculation of the stressed volatility for the stress scenario. I hope I actually typed the right formula for calculating the scenarios for ...
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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 ...
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GARCH model with exogenous events

GARCH models capture positive serial correlation in volatility. Sometimes events occur "out of the blue", causing volatility that a GARCH model cannot be expected to predict. One example is ...
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EGARCH and GARCH effects with White Noise squared residuals

I'm asked to model a series which it's returns are white noise and after adjusting a regression like $r_t=c$ and looking it's squared residuals (white noise too) I'm asked to adjust a GARCH and EGARCH ...
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Performance metric that integrates market volatility?

Is there a performance metric like Sharpe that takes into account the volatility of the current market instead of only the volatility of the fund? I believe investors may have different degrees of ...
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Arbitrage Free Interpolation of Implied Volatility on Time Dimension

I’m working on a project to build a local volatility model out of implied volatility data and I’m currently testing the no-arbitrage version of SVI model as described in this paper Section 5.1 [...
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Why approximating dSigma/dS with dSigma/dK changes the ATM volatility at twice the rate?

I'm referring to the paper "Delta Hedging With a Smile", Sami Vahamaa (2004). It mentions: By approximating ∂σ/∂S with ∂σ/∂K, it is assumed that as S changes by one unit, there is a ...
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35 views

15-min, 30-min and 60-min volatility forecasts

I have high-frequency market data (irregularly spaced nanosecond timestamps) and would like to compute the volatility forecasts of the next 15, 30 and 60 minutes. Most of the literature I looked up ...
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Should diverging valuation multiples affect beta estimate?

Suppose we experience a significant equity market crash. All equities are affected, but the drawdown disproportionately affects equities in a specific sector - for example, say the broad equity market ...
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63 views

Python model for “Exploiting earnings volatility by Brian Johnson”

Brian Johnson has written great book on Exploiting Earnings Volatility. He explains how to use his novel approach to 1) solve for the expected level of earnings volatility implicitly priced in an ...
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1answer
55 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 ...
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69 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 ...
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47 views

transforming variables

I am would like to create a regression model with different variables however before using these variables in my regression model I would like to transform the variable in order to make it more ...
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73 views

Behavior of Vega PnL for 6 month ATM S&P500 option

I am interpolating the vol surface for 6 months maturity from price data for S&P500 options. For this vol smile I compute the ATM strike. I then assume I can buy a call option at this strike, ...
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Price volatility short-term (10 seconds) forecast

Dataset: list of all realized trades (BTCUSDT) from a certain cryptoexchange with timestamps (15 days worth of data) Problem: predict the "price volatility" (standard deviation of realized ...
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64 views

Why are FX options vols quoted in 25RR and 25BF terms instead of by strike like credit options?

Credit options follow a quoting convention for the vols based on strike, which fits in neatly with the Black-Scholes framework. So why are FX options vols quoted in terms of 25-delta Risk Reversals ...
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What are the components of VXN?

What are the exact components of VXN -- the volatility index for NASDAQ-100? The CBOE page links to the document for VIX, which clarifies the exact set of front-month near-the-money SPX options used ...
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Slippage Regression over volume and volatility

I would like to run a regression of slippage over volume and volatility, but I was thinking they are correlated, and their correlation increases throughout the day (U-shape). Would this corrupt my ...
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184 views

Easiest possible way to backtest a semi dynamic options strategy

I have a few options strategies Id like to backtest and I have some familiarity with Python. In particular Id like to backtest a "semi-dynamic" long vol. strategy putting on $0$ cost ...
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47 views

Use of ugarchroll vs ugarchforecast: setting parameters

I would like to generate 21 day ahead forecast volatility with ugarchroll. I know it is similar to ugarchforecast with the exception that ugarchroll is a rolling average which considers initially the ...
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34 views

Pricing deep OTM and short expiry options with Monte Carlo methods

Is there any good variance reduction technique to price with MC deep OTM and short tenor options under Local Volatility? Can importance sampling be used? I couldn’t find any reference which does not ...
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38 views

Is variance of residuals of Markov switching GARCH model regime specific?

I'm using MSGARCH package in R. By return_data/Volatility(fit.model), I get the residuals. When I calculate the standard deviation of the residuals, it turns out that it's close to 1 for all residuals....
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BEKK Garch for time-varying beta in python

I am currently trying to analyse stocks of the S&P500 for their time-varying beta using BEKK Garch in python(jupyter). Unfortunately, I can't find any good packages and the documentation for bekk ...
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how to interpret the results of a GARCH model fit R/python

I have got the following output from a gjrGARCH model, and I need help to interpret it in order to decide whether it is already a good model and proceed with the forecast. ...
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116 views

What's the difference between ATM Vol vs ATMF Vol?

May I ask what's the difference between At-the-money volatility vs At-the-money foward Vol?
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Price of Call & Put Spreads as Volatility Tends to Infinity in Bachelier Model

In the standard Black Scholes model, as we take volatility to infinity, the price of call spreads goes to zero and the price of put spreads goes to the difference in strikes. I ran a simulation using ...
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“ugarch” roll from “rugarch” not working in source()

I have an automatic rolling GARCH forecast using the rugarch package in R. It is stored in a file GARCH.R. When I try to run the code using source('GARCH.R'), I get ...
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61 views

Volatility of multimodal distribution of returns

Take $x_1, x_2, \ldots, x_T$ to be the price of a stock, indexed by $t=1, 2, \ldots, T$. Define rate of return at time $t>W$ for a window size of $W$ to be $$r_t = \frac{x_t - x_{t-W}}{x_{t-W}}$$ ...
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Are there noticeable jumps in index options price due to systematic hedging of structured products close to big expiry dates?

I am looking at investigating factors that will cause jumps in index options prices close to big expiries in the name. I imagine systematic rebalancing of structured products will have a large impact ...
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94 views

Value Option with Forward Volatilities

That is probably a rather simple question but I got confused and would be very thankful for help. Imagine we are in 2015 and have an option that expires in either 2016, 2017, 2018, 2019, 2020 or 2021. ...
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63 views

Historical VIX term structure data

I see that there is a CBOE page for collecting individual moments of term structure data, however, I'm wondering if anyone knows how to access historical data in bulk. Here's the CBOE page: http://...
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1answer
64 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 ...
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GARCH(1,1) forecast plot in R with training data

I've fit a GARCH(1,1) model in R and would like to create a plot similar to the one in this question: Is this the correct way to forecast stock price volatility using GARCH Could someone direct me to ...
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167 views

Where can I find a Python module for Stock volatility estimators using Yang Zhang method?

Does anyone know of a Python library that includes the calculation of historical stock volatility using the Yang Zhang estimator? I have tried and failed to find one but would expect this to have been ...
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realized correlation estimation

I'm trying to implement the Hayashi - Yoshida estimator for correlation (T. Hayashi, N. Yoshida: On covariance estimation of non-synchronously observed diffusion processes, 2005) and there's something ...
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Investment & Trading — Tracking Error

I think i am having a problem annualising my tracking error because im getting an oddly big number especially its bps. So my values are taken from Market-class where we get our returns yearly, which ...
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63 views

Intraday volatility measures in comparison to end of day measurement

I'm experimenting with Parkinson's Number and the Garman-Klass estimator I'm wondering what the appropriate number of days to sample over, is the number over 1-day useful at all, or should one take it ...
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difficulty pricing options using stochastic volatility

can someone kindly explain why it was difficult to obtain an explicit formula for pricing options under stochastic volatility. Thanks alot.
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Looking for a math description of upside/downside implied vols - does Dupire help?

This is in continuation of this post which explained the meaning of the vols in the vol smile as follows: Suppose you have a downsloping vol smile. Then, the fact that the vol is higher on the ...
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calculating sharpe-ratio and annualized returns

Im trying to get the sharpe ratio to be calculated daily but I can only calculate it annually, this is also happening for my annualized returns, can somebody help me please? ...
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I would like to fit a CARR model using the 'rugarch' package in R - what should I include in the specification?

I know I have to specify a GARCH model for the square root of range without a constant term in the mean equation - just unsure how to apply this in the rugarch function.
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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 ...
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Relationship between profit margins, historical volatility and implied volatility

In a scenario where no historic data exists in an option market, how would one come up with implied volatility for pricing of options, under the Black-Scholes-Merton model? My professor has ...
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How can I calculate forecast returns given volatility and mean forecast?

I have built a model for mean and volatility forecasting of SPY. Now I want to combine these two into a return forecast. For doing this, I have written the following code in R: ...
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155 views

Extrapolate Implied Volatility Surface

I have a moneynessratio-tenor volatility surface and want to extrapolate the implied volatility for moneynessratios > 150%. The volatility surface was downloaded for different points in time, so I ...
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Valuing Long-Term (5+ year) Cliquet Options

I'm trying to figure out how to value long term equity cliquet options with expirations 5+ years out. Even for SPX cliquets, vol surfaces are from what I can tell non-existent. Where would someone get ...
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How to model the different returns of agents with different information information

For a seminar, I would like to graphically represent the returns made by agents of different information standpoints. In other words, say I have a market tuple $(\Omega, \mathbb{F}, P,S)$ where $S$ is ...
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how to calculate yearly volatility from weekly obersvations over 179 weeks?

I am working right now at something and I want to get sure that I am not doing any mistakes - maybe you can help me: I collected weekly returns from a stock over 179 weeks and know I want to ...
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What does “invest in portfolio volatility” mean?

In this paper, Barnea, Amir, Henrik Cronqvist, and Stephan Siegel. "Nature or nurture: What determines investor behavior?." Journal of Financial Economics 98.3 (2010): 583-604. it is mentioned ...