Volatility smile
Trading the vol-of-vol risk premium
Applications of the vol-of-vol parameter for cross-asset derivatives are presented
A new approach to marking volatility of illiquid options
Julius Baer quant’s arbitrage-free solution overcomes challenge of sparse data
‘Perfect’ VKO trades knock the smile off vol
Dealer hedging of options which profit from ‘spot down, vol down’ may have amplified rare dynamic
Deep calibration of rough volatility models
Rough vol models are calibrated and fitted to SPX and Vix smiles
Reviving the lost art of perturbation for exotic pricing
Natixis quants find novel way to speed up volatility smile modelling
Singular exotic perturbation
A solution based on local volatility and sensitivities is proposed to calculate exotics' prices
A new fast local volatility model
A local volatility model based on the Bass construction and alternative to Dupire-style models is introduced
Follow the moneyness
Barclays quants extend Bergomi’s skew stickiness ratio to all strikes
What is the volatility of an Asian option?
An adjustment for the volatility smile in Asian options is proposed
The volatility paradigm that’s stirring up options pricing
‘Rough volatility’ models promise better pricing and hedging of options. But will they catch on?
SABR smiles for RFR caplets
The SABR model for volatility is adapted to price risk-free rate caplets
Quants of the year – Jim Gatheral and Mathieu Rosenbaum
Risk Awards 2021: rough volatility models could make the options market more efficient
Degree of influence: volatility shakes markets and quant finance
Volatility and machine learning were among the top research areas for quants this year
A step closer to the perfect volatility model
Research on ‘rough volatility’ gives fresh insight into financial fluctuations, quant expert explains
Finite difference schemes with exact recovery of vanilla option prices
A model unifies the classic local vol and binomial trees to accurately price options
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
EU banks grapple with NMRF proposals for volatility models
EBA options for lighter capital treatment of parametric curves could prove impractical
The extended SSVI volatility surface
This paper extends Gatheral and Jacquier’s surface stochastic volatility-inspired (SSVI) parameterization by making the correlation maturity dependent and obtaining the necessary and sufficient conditions for no calendar-spread arbitrage.
Swaptions vol modelling tweak opens up pricing possibilities
Nomura quant proposes local volatility model that can directly calibrate to swaption smiles
Degree of influence, 2017: Quants dissect initial margin
Initial margin, optimal execution and applications of machine learning were the hottest topics of 2017
Pricing and hedging options with rollover parameters
This paper consists of a “horse race” study comparing (i) a number of option pricing models, and (ii) roll-over estimation procedures.
Model-free valuation of barrier options
Austing and Li provide a continuous barrier options pricing formula that fits the volatility smile