Volatility smile
Stochastic volatility’s orderly smiles
Stochastic volatility’s orderly smiles
Sponsored statement: Ito33
Which model for equity derivatives?
Market-consistent equity risk premiums
Market-consistent equity risk premiums
Filling the gaps
Filling the gaps
Trade of the month: volatility smiles
Trade of the month: volatility smiles
Volatility has become affordable again, says Deutsche Bank
Volatility has become affordable again, says Deutsche Bank
Trade of the month: Volatility skew
Trade of the month: Volatility skew
Smiling jumps
Smiling jumps
Sponsored statement: The problems with generally used interpolation spaces
In a world increasingly focused on effective enterprise-level risk management, there are notable discrepancies in volatility management techniques. Murex proposes a cross-asset interpolation space with potentially significant risk management impacts
The inflation pricing conundrum
Fear of a spike in consumer prices has created greater demand for inflation protection from a variety of participants. This has increased the need for inflation pricing and analytics tools – but it is not as simple as tweaking existing models used for…
Expanded smiles
Implementing models with stochastic as well as deterministic local volatility can be challenging. Here, Jesper Andreasen and Brian Huge describe an expansion approach for such models that avoids the high-dimensional partial differential equations usually…
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…
Calibration of local stochastic volatility models to market smiles
Pierre Henry-Labordère introduces a new technique for calibrating local volatility extensions of arbitrary multi-factor stochastic volatility models to market smiles. Although approximate, this technique is both fast and accurate. The procedure is…
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…
A difference of opinion
CMS spread options have been just about everywhere this year, with investors keen to take a view on the shape of the yield curve. But a wide variation in pricing has sparked speculation that some banks may not be modelling these products accurately. By…
Pricing exotics under the smile
Masterclass – with JP Morgan
The vol smile problem
The author examines a wide range of volatility smile models in the context of the liquidity of the forex options markets
Static barriers
Exotic options
Volatility swaps made simple
Volatility
Swaptions with a smile
Masterclass – with JP Morgan