Skew
Beyond Black-Litterman: views on non-normal markets
In normally distributed markets, the Black-Litterman technique allows managers to construct portfolios that account for their views on a set of expected returns. Attilio Meucci extends the Black-Litterman framework to generic market distributions and…
Smile dynamics II
In an article published in Risk in September 2004, Lorenzo Bergomi highlighted how traditionalstochastic volatility and jump/Lévy models impose structural constraints on the relationshipbetween the forward skew, the spot/volatility correlation and the…
Time to smile
Cutting edge: Option pricing
On the log-log linearity of the size distribution of growth stocks
Mauboussin & Schay (2000)1 discovered an almost linear relationship between the logarithm of the market capitalisation and the logarithm of the rank for growth stocks. Kou & Kou (2001)2 proposed an explanation for this observation based on the theory of…
Calibrating random volatility
Stochastic volatility
The tree of knowledge
Options
If the skew fits
Volatility