Volatility
FX option selling and weak demand behind vol slide, say traders
EUR/USD vol inches towards pre-Covid lows, but some believe inflation could upset trend
Don’t fret about elevated skew, vol experts say
Extreme relative cost of tail risk hedging is driven by flows more than fear
Correlated idiosyncratic volatility shocks
To capture the commonality in idiosyncratic volatility, the authors propose a novel multivariate generalized autoregressive conditional heteroscedasticity (GARCH) model called dynamic factor correlation (DFC).
Isda disputes excessive FRTB charges for carbon trading
EU carbon certificates show lower volatility and higher netting than Basel approach assumes
‘It’s the economy’: forecasting an op risk climate change spike
History of op risk suggests economic impacts of climate change could exacerbate losses, writes op risk head
NSCC caught $600m short during meme-stock frenzy
Worst-case losses would have wiped out the CCP’s available liquid resources on one day in Q1
The effects of transaction costs and illiquidity on the prices of volatility derivatives
This paper employs a PDE approach to price several volatility derivatives under different transaction costs and illiquidity models.
Podcast: Piterbarg on medians and machine learning
How the Libor transition inspired NatWest quant’s latest paper on exotic derivatives valuation
The Texas freeze and future calamities – How to build business resiliency in the face of disruption
Adverse weather in February stressed the Texas power grid to the point of failure, leaving millions without power and resulting in many firms filing for bankruptcy. While this event had some unique circumstances, extreme events are becoming more frequent
If dogecoin goes to the moon, a risk manager should go too
There seems little logic to the price of meme assets – but bold investors can protect themselves, says tech expert
The step stochastic volatility model
Extreme short-dated skew can be obtained by decomposing it in two parts
Option pricing using high-frequency futures prices
The authors examine two potential routes to improve the outcome of option pricing: extracting the variance from futures prices instead of the underlying asset prices, and calculating the variance in different frequencies with intraday data instead of…
Insider fraud – Getting security and controls right
Even prior to the Covid-19 pandemic, insider threats were reported to be increasing with 48% of firms indicating that incidents were on the rise within their organisations. Where are so many firms going astray?
Is short vol taking the long count?
Short volatility players try to box clever after strategy’s Covid rout
The price of Bitcoin: GARCH evidence from high-frequency data
This is the first paper that estimates the price determinants of Bitcoin in a generalized autoregressive conditional heteroscedasticity (GARCH) framework using high-frequency data.
Modeling realized volatility with implied volatility for the EUR/GBP exchange rate
This paper concerns the application of implied volatility in modeling realized volatility in the daily, weekly and monthly horizon using high-frequency data for the EUR/GBP exchange rate.
Hero or villain? NSCC draws fire for Robinhood margin waiver
Fears of moral hazard after CCP waives billions in margin demands following meme-stock volatility
Rough volatility’s steampunk vision of future finance
Some of the trickiest puzzles in finance could be solved by blending old and new technologies
The volatility paradigm that’s stirring up options pricing
‘Rough volatility’ models promise better pricing and hedging of options. But will they catch on?
Factor woes prove need for better timing – QuantZ’s Sharma
Investors should switch between factors as alphas change, says quant
Deep hedging strays when volatility gets rough – study
In the most realistic simulations, data-driven approach fared 30% worse than conventional hedging
SABR smiles for RFR caplets
The SABR model for volatility is adapted to price risk-free rate caplets
A verification model to capture option risk and hedging based on a modified underlying beta
This paper analyzes the relationship between option risk and expected return from the perspective of the underlying beta, and estimates the degree of correlation.
My kingdom for the right copula
Copulas can still deliver if chosen with due attention to intuition and data, says quant fund chair