Implied volatility
Curbing dispersion exposure
Dispersion tactics
A Libor market model with a stochastic basis
A Libor market model with a stochastic basis
Barclays Capital’s VXX is bleeding volatility, analysts claim
An upwardly sloping term structure of volatility is dragging on the performance of the popular exchange-traded note.
Eurostoxx 50 investors 'unintentionally making a bet on financials', according to research
Tobam's analysis of financial markets diversification suggests that eurozone indexes might not be as diversified as investors believe
Sponsored statement: Using options to improve portfolio risk/returns
Using options to improve portfolio risk/returns
Equity derivatives
Equity derivatives special report
Equity investors struggle with high correlation
Dealing with a break-up
End-users rush into hedging oil prices
End-users are ploughing into hedging their oil positions, as prices remain in a tight range, says Standard Chartered Bank’s head of energy and environmental research
Structural shifts in equity flows and ETFs force up correlation, says HSBC
HSBC's global report indicates that correlation in the global equities market has been steadily rising since 2001.
Sponsored statement: Controlling volatility to reduce uncertainty
Controlling volatility to reduce uncertainty
A dynamic model for correlation
Equity markets have experienced a significant increase in correlation during the crisis, resulting in exotic derivatives portfolios realising large losses. As larger correlations in downward scenarios are already implied in the index option market in the…
Putting the smile back on the face of derivatives
Cross-asset quadratic Gaussian models have been limited in the scale of their implementation by the difficulty in ensuring the correct drift conditions to omit arbitrage. Here, Paul McCloud shows how to exploit the symmetries of the functional form to…
Smile dynamics IV
Lorenzo Bergomi addresses the relationship between the smile that stochastic volatility models produce and the dynamics they generate for implied volatilities. He introduces a new quantity, the skew stickiness ratio (SSR), and shows how, at order one in…
Sponsored statement: The implied volatility surface in the presence of dividends
Standard Bank quantitative analyst Roelof Sheppard shows how absolute and proportional dividend payments give rise to arbitrage constraints on the implied volatility surface
Combining the SABR and LMM models
Pierre Henry-Labordere analyses a stochastic volatility Libor market model that combines the SABR and Brace-Gatarek-Musiela (BGM) models in a natural way. Using an innovative geometrical method, he explains how to obtain analytical formulas for swaption…
The equity volatility-credit link
Sponsored Statement
Combining the SABR and LMM models
Pierre Henry-Labordere analyses a stochastic volatility Libor market model that combines the SABR and Brace-Gatarek-Musiela (BGM) models in a natural way
A time-homogeneous, SABR-consistent extension of the LMM
Riccardo Rebonato proposes an extension of the Libor market model (LMM) that recovers the stochastic, alpha, beta, rho (SABR) caplet prices almost exactly for all strikes and maturities. The dynamics of the volatility are chosen so as to be consistent…
A time-homogeneous, SABR-consistent extension of the LMM
Riccardo Rebonato proposes an extension of the Libor market model (LMM) that recovers the SABR caplet prices almost exactly for all strikes and maturities. The dynamics of the volatility are chosen so as to be consistent across expiries, to be…
The vanna-volga method for implied volatilities
Cutting Edge - Option pricing