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4 votes

Sticky delta vs sticky strike

By doing a bit of differential chasing you can get a closed form solution for the adapted aka sticky delta of a market call option. Recall that the price C of a market call option is given by the ...
river_rat's user avatar
  • 1,080
4 votes
Accepted

Extending/Subclassing QuantLib Classes in Python?

I think you can use a combination of the ql.DeltaVolQuote and ql.BlackDeltaCalculator classes with the ...
user35980's user avatar
  • 1,416
2 votes

What's wrong with calibrating implied volatilities with polynomials?

First of all, you don't calibrate IVs. You interpolate and extrapolate IVs in order to calibrate a model. There is nothing wrong with interpolating and extrapolating with polynomials, as long as no-...
Frido's user avatar
  • 1,906
2 votes

Expressing Volatility Smile as One Number

I looked into the vol of vol parameter in the SABR model and just wanted to share my thoughts on it as a prospective curvature measure. The SABR model is governed by the following stochastic processes:...
KaiSqDist's user avatar
  • 1,409
2 votes

Extending/Subclassing QuantLib Classes in Python?

Just to confirm: subclassing the Python wrappers doesn't work.
Luigi Ballabio's user avatar
2 votes

Sticky delta vs sticky strike

A simple example. Suppose you have a call and spot rallies ($\Delta S >0$), say your skew is downward sloping, then you would make money but not as much as you'd think in a sticky delta regime. ...
user68819's user avatar
  • 505
1 vote
Accepted

filtering implied Vol surface for butterfly arbitrage

We faced a similar issue in our work, where we aimed to eliminate all forms of arbitrage, including butterfly arbitrage, from our implied volatility (IV) surface. Rather than removing specific options,...
lukas kiss's user avatar
1 vote
Accepted

Delta on x-axis in Volatility smile

It's important to note that this is only done for certain markets, predominantly foreign exchange, and almost always OTC, where there is no set number of available strikes and no direct price quotes. ...
AKdemy's user avatar
  • 9,014
1 vote

week-over-week impacts on IV of of options with close to before/after EOY expirations

Implied total variance is the actual volatility quantity being bet on with options. IV is a convenient way to discuss total variance because the numbers are more intuitive. Let $\tau$ be the total ...
Yike Lu's user avatar
  • 266
1 vote

Sticky delta vs sticky strike

I always find charts intuitive. I'll look at calls, but it is straigthforward to extend it to puts as well. As mentioned in a comment: Sticky strike is really just black Scholes delta computed with ...
AKdemy's user avatar
  • 9,014
1 vote

what is the point of SABR model as an interpolation tool if we can already observe the whole vol cube from the market

SABR is a stochastic vol model with the vol parameter being a (stochastic) function of the underlying swap rate. Yes, you can use market skew data and build a linearly interpolated swaption vol cube. ...
user35980's user avatar
  • 1,416
1 vote
Accepted

In the context of derivatives pricing, what are Pillars and Marking?

Pillars tend to refer to maturities/expiries in the fixed income world. Marking - is basically where your official system has the value of a particular benchmark security at a particular point in time ...
user68819's user avatar
  • 505

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