Volatility skew
Sponsored forum: US inflation derivatives
US inflation markets have been through some major events in 2012, including the launch of open-ended quantitative easing and knock-on effects from the forced unwind of Greek asset swaps. Against a backdrop...
Lorenzo Bergomi and Julien Guyon derive an expansion of the volatility surface of general stochastic volatility models at second order in volatility of volatility that is accurate for a wide range of strikes....
The capital asset pricing model used to determine excess return for a given risk level and allocate assets typically uses historical data, which can be a poor predictor of risk. Here, Adrian Alscher and...
Using market and credit risk analytics to strengthen performance
How are banks improving their risk management techniques?
This handy guide reviews the various steps banks are taking to improve their risk management techniques, looking at the benefits and pitfalls of each one.
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Filling the gaps
Calibrating a local volatility model to options prices is a complicated process requiring both interpolation of liquid prices and extrapolation beyond them. Recently focus has turned to efficient numerical methods. Here, Alex Lipton and Artur Sepp show...
Investors turn to hybrid equity strategies as volatilities descend to...
There is still good value in owning volatility as a risk management tool, either as an overlay to a long equity portfolio or to replace long equity exposure with the upside strategies, says Deutsche Bank strategist
Volatility skew
The difference in implied volatility between out-of-the-money puts and calls. The origins of the volatility skew are not always clear, but factors may include reluctance to write calls rather than puts, sentiment about market direction, and supply and...
Implied volatility
The volatility level that, assuming a certain pricing model, equates the calculated value of the option to its current market price. * see also volatility skew; volatility smile; volatility term structure
How can investment banks use grid technology?
Learn how technology is enhancing risk management
Technology can provide a competitive advantage in banking. How it is applied by Tier 1 and Tier 2 institutions, to the benefit for their risk management systems, is discussed.
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Using market and credit risk analytics to strengthen performance
This white paper reviews the various steps banks are taking to improve their risk management techniques.
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