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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Monte Carlo simulation based VaR: daily vs annual parameters

I am given the initial price, annualized return, and volatility of a security. I am trying to calculate annualized VaR using Monte Carlo simulation approach. To do this I will use the following ...
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How to estimate $\sigma$ and $r$ in binomial pricing model?

I am writing a program to price American put options with binomial pricing model and to compare it with the market price. When I used made-up numbers for $\sigma$ and $r$, the price by binomial ...
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Volatility vs. Moving Average Distance

Currently I am designing a little market making bot for forex trading, that puts offers around the mid price. In the market I am trading it happens the order book becomes so thin that the mid price ...
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Monte Carlo volatily

I was wondering if we could do a forecast on volatility using monte carlo on an underlying asset. For example EUR/USD : Simulating a lot of possible paths on 1 year then calculate the volatilty for ...
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201 views

Black Variance Surface

I came across black variance surface in quantlib code. For options, usually volatility surface is used for pricing. When you will use variance surface for pricing or any advantages over volatility ...
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Estimating volatility

Why is $$\frac{ \left(\frac{ \Delta S}{S}\right)^2} {dt}$$ an estimator of volatility squared (as claimed by my book)? As far as I understand it, we estimate volatitility squared as $$\frac{ Var( \...
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190 views

Caplet and Swaption Volatilities

Why is volatility always quoted in terms of caplet and swaption? Why not quoted in terms of other instruments?
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98 views

Approximating an SDE for Volatility Estimation

Consider the SDE $$ dT(t) = ds(t) + a(s(t) - T(t))dt + \sigma dW(t) $$ where $s(t)$ is a deterministic function that turns out to be the long-term mean (this SDE is used to model daily temperature, so ...
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139 views

Stochastic Volatility for Stocks, FTSE

Can someone help me with calculating Stochastic Volatility (of stocks and options) using SAS or R or Matlab please? I am new to SAS and I am trying to use Heston model, White-Hull model or any other ...
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248 views

Implied volatility in parametric VaR

I'm calculating 1-day parametric VaR estimates for a stock index under the simple assumption that the returns are normally distributed. My question is, what is your opinion of using a volatility index ...
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Calculate Idiosyncratic Risk?

I have basic finance background but I am trying to calculate idiosyncratic risk as measure for firm risk in my CEO gender research. I have found the following on Alpha architect but I am unsure of ...
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Quanto derivatives and FX risk management

Let us assume that we have a foreign asset with volatility $\sigma_{ASSET}$. Now, I know that when pricing this under the foreign measure, I need to do a drift adjustment, namely $\sigma_{ASSET NEW}^2 ...

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