Vix

Surviving skew

Skew skyrocketed in May, breaking through levels last reached in 2008 after the bankruptcy of Lehman Brothers, while volatility and correlation also spiked. The dislocations are rumoured to have caused losses for some exotic equity books. How did dealers…

Volatility returns to pre-Lehman levels

Market volatility across several sectors has dropped back to levels last seen before the collapse of Lehman Brothers in September 2008, lending weight to the belief that the financial markets are on the road to recovery.

Smile dynamics III

In two articles published in 2004 and 2005 in Risk, Lorenzo Bergomi assessed the structural limitations of existing models for equity derivatives and introduced a new model based on the direct modelling of the joint dynamics of the spot and the implied…

Ted spread returns to pre-Lehman levels

The New Year has seen the Ted spread, a perceived level of counterparty risk, reach its lowest level since Lehman Brothers filed for Chapter 11 bankruptcy on September 15 last year. Elsewhere, interbank lending rates continued to fall.

Smile dynamics III

In two articles published in 2004 and 2005 in Risk, Lorenzo Bergomi assessed the structural limitations of existing models for equity derivatives and introduced a new model based on the direct modelling of the joint dynamics of the spot and the implied…

Vix option pricing in a jump-diffusion model

Artur Sepp discusses Vix futures and options and shows that their market prices exhibit positive volatility skew. To better model the market behaviour of the S&P 500 index and its associated volatility skew, he introduces the stochastic dynamics of the…

Spike in equity volatility causes pain

A spike in equity volatility last month has caused anxiety among equity derivatives dealers, many of which were short volatility, and raised fears that a prolonged increase could generate hefty mark-to-market losses in equity derivatives trading books.

Realised volatility and variance: options via swaps

Peter Carr and Roger Lee present explicit and readily applicable formulas for valuing options on realised variance and volatility. They use variance and volatility swaps - or alternatively vanilla options - as pricing benchmarks and hedging instruments…

CBOE Vix options thrive on first day

The Chicago Board Options Exchange (CBOE) has recorded a strong first day of trading for its options on its volatility index, Vix. The number of options traded were 4,328 calls and 5,095 puts, totalling 9,423 contracts by the end of the day on February…

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