# Tag Info

### Which models do Bloomberg/Reuters use to derive implied volatility for interest rate derivatives with negative forward rates?

Short Version Market standard is to use Normal Vol (used in the Normal / Bachelier model) Market data comes from contributors like Tullett, ICAP and the like and can be premium and vol quoted etc. ...
Accepted

### Is variance swap long volatility of volatility?

My two cents: Let's agree that a derivative is long an underlying if the payoff of the derivative increases with the price of the underlying $S$. Then buying a variance swap is going long the ...
Accepted

### What does implied volatility say about the underlying?

A vol surface displays implied volatilities (IVOL) for various tenors and strikes. It can be displayed in several ways, with the two most common being: Moneyness Delta Interest rate options are a ...

### Is variance swap long volatility of volatility?

What about the following argument: a variance swap can be replicated with a portfolio of vanilla options, nearly all of which are out of the money (OTM) . But it is well known that OTM options are ...
Accepted

### Bartlett's delta gives wrong signs for calls and puts

Bartlett's delta as computed in your code is a simple finite difference (FD), also called bump and reprice, of the Black values. I do not think there is anything wrong here, besides the fact that you ...

### interest rate, dividend rate data for black scholes model

The experts on this issue are the people at the CBOE who compute the VIX volatility index. I suggest you use the same methodology described in this document Cboe Volatility Index Mathematics ...

### interest rate, dividend rate data for black scholes model

The interest rate can be derived from put call parity. A number of questions about how to do this have been asked, for example this one but look at related questions as well. For European options ...
Accepted

### How to structure a trade using vanilla equity options to get vega exposure to forward volatility?

Let $I(K_1)$ be the IV of a vanilla option with strike $K_1$ and maturity $T_1$ and similarly $I(K_2)$ corresponds to strike $K_2$ and maturity date $T_2 > T_1$. What I'd suggest you try to trade ...

### Is variance swap long volatility of volatility?

Since the variance swap is linear in variance. Its local volatility exposure is 2σ, with second derivative = 2. If one was to hedge this local volatility exposure using options or a volatility swap, ...
Accepted

### Option Pricing for Illiquid case

Warning upfront: I have NO experience with crypto currencies. I believe I do have a relatively decent experience with options in general though. What follows will be a generic explanation, largely ...
Accepted

### Calibration of Heston using implied vol as $v_0$

Using the ATM implied vol of short term options is indeed a common practice for $v_0$ as in your Scenario 2. Linear interpolation should be enough, given that 1 week is somewhat arbitrary anyway. In ...