# Tag Info

Accepted

### Arbitrage Free Volatility Smile

I generally agree with @dm63's answer: A convex (concave) smile around the forward usually indicates and leptokurtic (platykurtic) implied risk-neutral probability density. Both situations can or ...
• 5,799
Accepted

### SSR definition in Bergomi in relation to sticky strike and sticky delta

Some Notations It's easy to get lost so let's introduce some notations and let $$\sigma : (t, S, K, \tau) \to \sigma(K,\tau; S, t)$$ denote the implied volatility smile prevailing at time $t$ ...
• 14k

### Forward implied volatility

From an equities perspective, there are two concepts that should not be confused in my opinion and context should make the distinction self-explicit: Forward variance swap volatility (A) Forward ...
• 14k

### Why is there greater demand for OTM and ITM options than for ATM options?

Either you or some reference you are following is in error here. At-the-money (or at least near-the-money) options are the most liquidly traded. And trading is much more heavy in out-of-the-money ...
• 1,865

### Mixed local-stochastic volatility model in Quantlib

Stochastic-Local Vol (SLV) is an attempt to mix the strengths and weaknesses of both Stochastic Vol and Local Vol models. Below, I'll quickly summarise each model and their strengths and weaknesses, ...
• 2,856
Accepted

### Implied Vol Smile: from Calls, Puts or Both?

Call and a put of the same strike have the same I.V, in theory. The ONLY reason for this to differ is the limits to arbitrage on call put parity. Now this is a static strategy that has no rebalancing ...
• 1,662

### In Dupire's paper, why is $(S_t, t)$ in the $(K, T)$ space?

The local volatility is just a $\mathbb{R}_+\times[0,T]\mapsto \mathbb{R}_+$ function where $T$ is some time horizon. It is the solution of a simple equation so it expression is written as \$\sigma(K,t)...
• 545

### Volatility skew and how to capture it?

I wonder if the reasons these approximations are widely used - instead of a whole set of estimates for different deltas, as proposed - have to do with liquidity and market structure. Liquidity: A ...
• 360