Implied volatility
EBA relaxes modellability hurdles for market risk capital
Flexibility granted for assessing NMRFs on options, but constraints remain on committed quotes
Solving the enigma of the volatility smiles
Has the problem of jointly calibrating the volatility smiles of the Vix and S&P 500 been solved?
The quadratic rough Heston model and the joint S&P 500/Vix smile calibration problem
A combination of rough volatility and price-feedback effect allows for SPX-Vix joint calibration
The SABR forward smile
Thomas Roos presents the expressions for the implied volatilities of European and forward starting options
FX vol revived by Covid-19 – but for how long?
Traders split on whether virus impact, or central bank responses, will prove most powerful
ABN winds down Ronin books after Vix losses
$200m loss suffered by bank’s clearing business is thought to be mystery second default
Autocalls hit peak vega, where hedging costs mount
Eurostoxx and Nikkei losses flip structured product dealers into painful short vol territory
Dispersion trades suffer in coronavirus selloff
Losses put at roughly $150m – even before markets tanked on March 9
Bank disruptors: Crédit Ag taps AI to lure swaptions business
Machine learning model predicts client demand with high accuracy, giving traders an edge in pricing
Volatility forecasting: the role of internet search activity and implied volatility
In this study, the authors search for a benchmark model with available market-based predictors to evaluate the net contribution of internet search activity data in forecasting volatility. The paper conducts in-sample analysis and out-of-sample…
Volatility becalmed, trade in forex options plummets
With central banks in tandem on policy, market churn has lessened considerably, and trading as well
The Chebyshev method for the implied volatility
In this paper, the authors propose a bivariate interpolation of the implied volatility surface based on Chebyshev polynomials. This yields a closed-form approximation of the implied volatility, which is easy to implement and to maintain.
Search for alpha in a volatile world
Alpha generation can be an elusive goal, particularly when trading volatility. Three different approaches to trading volatility were discussed by a panel looking at the role of systematic and carry strategies in finding profit in a high-volatility world
EU banks grapple with NMRF proposals for volatility models
EBA options for lighter capital treatment of parametric curves could prove impractical
How AI could tear up risk modelling canon
BlackRock, MSCI, LFIS among firms looking to replace traditional, linear risk models
Alternative Liquidity Measures
Is book depth a sufficiently representative measure of market liquidity? A look at trade matching performance under different market volatility environments
Podcast: Ronn on using a financial-economics approach to forecast crude oil spot prices
Professor of finance talks about using equity, index and crude oil options to forecast spot prices
Fundamentals fuelling smart beta in China
As Chinese equity markets mature and become increasingly driven by fundamentals, the time is right for international investors to invest in smart beta strategies, say Vincent Yam, head of trading, and Weiwei Wang, senior derivatives trader at Guotai…
Eurostoxx dislocations signal autocall hedging pain
Swings in dividends and volatility reveal year-end stress as European index slump tests “peak vega”
FX traders dump short-dated options on Brexit mire
Attention turns to long-dated positions after failed no-confidence vote
You don’t need to sacrifice accuracy for flexibility
BAML quant proposes option pricing model that softens conflict between the two properties
Equity vol strategies get defensive
Floored short funding legs and long vega worked in latest US selloff, dealers claim