New answers tagged implied-volatility
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Realized vol, implied vol, and gamma scalping
In the end I decided to write a brief answer:
Let's accept that typically implied vol (IV) is larger then realized vol (RV). This is another good answer making this plausible.
Your PnL formula is ...
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Delta volatility curve construction in practice
Yes it is. However, you should normally do this (average of the call and put IVs) only for ATM options (I myself bound them using moneyness 0.95 < K/S < 1.05).
For options outside these bounds, ...
- 1,670
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What is implied volatility relationship with time?
It is well known that the value of At the money options is proportional to $\sigma\sqrt{T-t}$ where $\sigma$ is the implied annualized volatility. So as time evolves, the value falls naturally due to ...
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Selecting volatility for stress scenario
Not a stress testing expert, but from my own (empirical) research about how the volatility skew changes across time - you'd be surprised how insignificant the change in convexity of the volatility ...
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