Implied volatility

Andreas König’s crisis playbook meets Covid-19

Interview: Trading from home may be odd, but Amundi’s FX head was ready for other stresses

Bachelier – a strange new world for oil options

Model tuned to negative prices has implications for pricing, margining and delta hedging

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

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

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