Implied volatility
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.
Search for alpha in a volatile world
Alpha generation can be an elusive goal, particularly when trading volatility. Three different approaches to trading volatility were discussed by a panel looking at the role of systematic and carry strategies in finding profit in a high-volatility world
EU banks grapple with NMRF proposals for volatility models
EBA options for lighter capital treatment of parametric curves could prove impractical
How AI could tear up risk modelling canon
BlackRock, MSCI, LFIS among firms looking to replace traditional, linear risk models
Alternative Liquidity Measures
Is book depth a sufficiently representative measure of market liquidity? A look at trade matching performance under different market volatility environments
Podcast: Ronn on using a financial-economics approach to forecast crude oil spot prices
Professor of finance talks about using equity, index and crude oil options to forecast spot prices