4 votes
Accepted

Annualized rolling volatility?

We work in annual units because $T=1$ means one year. This means that the time units must be converted to portions of a year. For example, in the case of daily observations, $\Delta t = 1 / 252$. ...
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4 votes
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What is the consensus interpretation of index future dealer gamma?

If dealers are short gamma, as you say, the client base is long gamma. The explanation for this will not always be the same, but here’s a few possibilities client base has bought a lot of puts to ...
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  • 13.7k
2 votes
Accepted

Estimating historical volatility from inconsistent time intervals

To make @nbbo2's answer more precise, let's assume that we observe various sums $z_{k,h}$ of independent and identically distributed random variables $x_i$ (i.e. returns), $$ z_{k}\equiv \sum_{i=k-h_k+...
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  • 5,513
1 vote
Accepted

How to optimize two highly correlated risky assets?

The variance of the linear combination of returns $(\omega_{1} \times ret_1 + \omega_2 \times ret_2) = $ $\omega_{1}^2 \times \sigma^2(ret_{1}) + \omega_2^2 \times \sigma^2(ret_{2}) + \omega_1 \times \...
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  • 1,017
1 vote

implied volatility and strike price

Notations: $T,K$ are the maturity and the strike of a vanilla call of price $C(T, K)$. $(S_t)_{t\in [0,T]}$ the price process of the underlying. $\mathbb{Q}$ is the risk neutral measure. $x(T,K) = ...
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1 vote

Why is volatility said to be persistent?

If you're sceptical on the persistence of volatility, but cannot refute it from observations, then the rough volatility viewpoint may be accommodating. In essence, volatility is driven by a fractional ...
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  • 11

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