Implied volatility
Follow the moneyness
Barclays quants extend Bergomi’s skew stickiness ratio to all strikes
Using equity, index and commodity options to obtain forward-looking measures of equity and commodity betas and idiosyncratic variance
This paper presents a means to extract forward-looking measures of equity and commodity betas, and idiosyncratic variance.
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
OCC quants tout anti-procyclical margin method
Technique aims to lower initial margin calls in times of stress without sacrificing risk sensitivity
An approximate solution for options market-making
An algorithm for the market-making of options on different underlyings is proposed
Goldman inks modelling, data tie-up with MSCI
Move to cross-sell risk analytics could herald further content deals for bank’s Marquee platform, says sales chief
Is short vol taking the long count?
Short volatility players try to box clever after strategy’s Covid rout
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.
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?
Nowcasting networks
The authors devise a neural network-based compression/completion methodology for financial nowcasting.
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
Numerical techniques for the Heston collocated volatility model
In this paper, the authors discuss all aspects of derivative pricing under the Heston–CLV model: calibration with an efficient Fourier method; a Monte Carlo simulation with second-order convergence; and accurate partial differential equation pricing…
Markets search for FX factor as rates fall flat
Traders signal shift to currency strategies, but is it passing fad or permanent fixture?
Strike a pose: deal contingents back in vogue after mid-year slump
M&A revival breathes life into deal contingent trades, but elevated risk keeps prices high
FX volatilities fall on receding US election fears
Polls point to a decisive Biden win – though some worry market is being complacent
Quants tout alternative carry trades for the ‘new normal’
Low rates and flatlining yield curves leave investors seeking carry in swaps and swaptions
Autocalamity: can hit product be reinvented?
Spreads on ‘worst-of’ bonds leap 50% as some dealers retreat and others pile on hedges
Concerns roil prop clearing waters in wake of ABN losses
State-backed lender insists few clients have defected – but sharks circle, post-Parplus
A tale of two (or three, or four) models
Performance measure based on quality of replicating portfolios outperforms ‘P&L explain’, new paper claims
Andreas König’s crisis playbook meets Covid-19
Interview: Trading from home may be odd, but Amundi’s FX head was ready for other stresses
Bachelier – a strange new world for oil options
Model tuned to negative prices has implications for pricing, margining and delta hedging
EBA relaxes modellability hurdles for market risk capital
Flexibility granted for assessing NMRFs on options, but constraints remain on committed quotes