Implied volatility
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
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
FX vol revived by Covid-19 – but for how long?
Traders split on whether virus impact, or central bank responses, will prove most powerful
ABN winds down Ronin books after Vix losses
$200m loss suffered by bank’s clearing business is thought to be mystery second default
Autocalls hit peak vega, where hedging costs mount
Eurostoxx and Nikkei losses flip structured product dealers into painful short vol territory
Dispersion trades suffer in coronavirus selloff
Losses put at roughly $150m – even before markets tanked on March 9
Bank disruptors: Crédit Ag taps AI to lure swaptions business
Machine learning model predicts client demand with high accuracy, giving traders an edge in pricing
Volatility forecasting: the role of internet search activity and implied volatility
In this study, the authors search for a benchmark model with available market-based predictors to evaluate the net contribution of internet search activity data in forecasting volatility. The paper conducts in-sample analysis and out-of-sample…
Volatility becalmed, trade in forex options plummets
With central banks in tandem on policy, market churn has lessened considerably, and trading as well
The Chebyshev method for the implied volatility
In this paper, the authors propose a bivariate interpolation of the implied volatility surface based on Chebyshev polynomials. This yields a closed-form approximation of the implied volatility, which is easy to implement and to maintain.
