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Results tagged with implied-volatility
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user 40873
The volatility of the price of the underlying security that is implied by the market price of an option based on an option pricing model.
6
votes
1
answer
1k
views
Procedure/methodology for building equity volatility surface
EDIT: I update while making progress:
I am trying to build (model implied) volatility surfaces for individual equities. I will use these surfaces to calibrate models to price different derivatives (p …
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3
votes
Why is the SVI parameterization in terms of variance?
Let $\tilde{a} = at$ and $\tilde{b} = bt$ and you can jump from a parametrization to another. In Gatheral and Jacquier's paper (Arbitrage-free SVI volatility surfaces) https://arxiv.org/pdf/1204.0646. …
- 628
4
votes
Using SVI model for IV surface
I use Gatheral's notations.
The SVI-Jump-Wings (SVI-JW) parameterization of the implied variance v (rather than the implied total variance
The raw and natural parametrizations describe the total …
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1
vote
0
answers
126
views
Procedure of model calibration
Say that your end goal is to price an equity exotic derivative under both Heston and the local volatility models (Black Scholes model with vola dependent on strike and underlying level). Do the follow …
- 628
2
votes
1
answer
289
views
Arbitrage-free IV surface definition vs. real arbitrage process
In the context of BS implied volatility surface fitting.
In the literature, it seems that conditions for arbitrage are defined in a way that assumes that options can be traded at the same price for …
- 628
3
votes
0
answers
189
views
How to shock the IV surface w.r.t VIX and keep AOA
I have to compute the sensitivity of a set of option prices on a single sotck (range of tenor is over the whole surface) to an increase of 100% in the VIX.. and I am trying to get to the most reasonab …
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