Implied volatility
Analytic risk-free rates option pricing with smile and skew
An arbitrage-free short-rate model for backward-looking compounded rates is presented
US vol experts hint at calm before storm in markets
Many buy-siders believe today’s relative tranquility in equities masks underlying fragility
Skew this: taking the computational burden off basket options
Dan Pirjol presents a snap formula for estimating implied volatility skew in an instant
Smile-consistent basket skew
An analytic approximation for the implied volatility surface of basket options is introduced
A robust stochastic volatility model for interest rates
A swaption pricing model based on a single-factor Cheyette model is shown to fit accurately
Podcast: Julien Guyon on volatility modelling and World Cup draws
Academic discusses option pricing, path-dependent volatility and tackling FIFA’s statistical bias
How a machine learning model closed a hidden FX arbitrage gap
MUFG Securities quant uses variational inference to control the mid volatility of options
Does the term structure of the at-the-money skew really follow a power law?
A power law can fit the ATM skew, but struggles with short maturities
Obtaining arbitrage-free FX implied volatility by variational inference
An ML-based algorithm that provides implied volatilities from bid-ask prices is proposed
The quintic Ornstein-Uhlenbeck model for joint SPX and VIX calibration
A new model that jointly fits the smiles of VIX and SPX is presented
Zero-day spikes vanish as bank worries exceed inflation fears
Implied volatility for short-dated options points to shift in sentiment after SVB failure
Zero-day options and the shadow of the apocalypse
For some, 0DTEs could spell doom in adverse market conditions; others dismiss such talk as dramatics
‘Spectacular’ vol disconnect ‘ominous’ for risk assets
Historic divergence has caught the eye of Boaz Weinstein and others
Rising star in quantitative finance: Sigurd Emil Rømer
Risk Awards 2023: Doctoral dissertation outlines more efficient way to simulate rough volatility models
Podcast: Zetocha on mini-futures (not those) and illiquid options
Julius Baer equity quant revels in solving problems for the trading desk
The real deal: the challenge of real interest rates
Understanding real interest rate dynamics as inflation transitions is vital, say Crédit Agricole traders
Trading the vol-of-vol risk premium
Applications of the vol-of-vol parameter for cross-asset derivatives are presented
Critical divergence in prices between Spikes and Vix after the Fed’s rate hike
In these uncertain times, when rates hikes and other structural drivers are giving rise to adverse market moves, reliable indicators of 30-day implied volatility are crucial
Analytical conversion between implied volatilities based on different dividend models
The authors propose an explicit formula for the conversion of implied volatilities corresponding to dividend modelling assumptions which covers a wide range of strikes and maturities.
A new approach to marking volatility of illiquid options
Julius Baer quant’s arbitrage-free solution overcomes challenge of sparse data
Sculpting implied volatility surfaces of illiquid assets
From the stock cumulative distribution function an arbitrage-free volatility surface is derived
‘Perfect’ VKO trades knock the smile off vol
Dealer hedging of options which profit from ‘spot down, vol down’ may have amplified rare dynamic
UK budget gives sterling options traders a wild ride
Reaction to tax cuts sparks most active week for GBP/USD options traders since Brexit negotiations
Deep calibration of rough volatility models
Rough vol models are calibrated and fitted to SPX and Vix smiles