Vix
Equity investors struggle with high correlation
Dealing with a break-up
VAR drops in Q2 despite sovereign risk fears
Most large banks had less exposure to market risk during the second quarter, despite volatile conditions in many asset classes.
BAML tinkers with tradable volatility index for tail risk hedging
Bank of America Merrill Lynch has developed a liquid volatility index for institutions which are seeking a systematic tail risk hedge.
Volatility, correlation and skew too
Surviving skew
Surviving skew
Skew skyrocketed in May, breaking through levels last reached in 2008 after the bankruptcy of Lehman Brothers, while volatility and correlation also spiked. The dislocations are rumoured to have caused losses for some exotic equity books. How did dealers…
Volatility fears increase after May whiplash
Equity markets suffered a whiplash effect before and after the second weekend of May, with the Eurostoxx 50 dropping 4.26% on Friday, May 7, only to bounce back by 10.35% the following Monday.
Risk indicators spike during a dramatic week
Volatility rose to near-record levels this week as eurozone anxiety intensified
US Structurer
Structured Products Americas Awards 2010
Index Innovation
Structured Products Americas Awards 2010
Volatility returns to pre-Lehman levels
Market volatility across several sectors has dropped back to levels last seen before the collapse of Lehman Brothers in September 2008, lending weight to the belief that the financial markets are on the road to recovery.
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…
Ted spread returns to pre-Lehman levels
The New Year has seen the Ted spread, a perceived level of counterparty risk, reach its lowest level since Lehman Brothers filed for Chapter 11 bankruptcy on September 15 last year. Elsewhere, interbank lending rates continued to fall.
Volatility knocks
Variable Annuities
"Fear index" hits high as Ted spread breaks 4%
The Ted spread, which tracks the difference between three-month Libor and US Treasury bills, hit yet another all time high today, reaching 4.03% at 1400 BST.
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…
Vix option pricing in a jump-diffusion model
Artur Sepp discusses Vix futures and options and shows that their market prices exhibit positive volatility skew. To better model the market behaviour of the S&P 500 index and its associated volatility skew, he introduces the stochastic dynamics of the…
Calibrating and pricing with local volatility models
Cutting edge - Option pricing
Spike in equity volatility causes pain
A spike in equity volatility last month has caused anxiety among equity derivatives dealers, many of which were short volatility, and raised fears that a prolonged increase could generate hefty mark-to-market losses in equity derivatives trading books.
Calibrating and pricing with embedded local volatility models
Consistently fitting vanilla option surfaces when pricing volatility derivatives such as Vix options or interest rate/equity hybrids is an important issue. Here, Yong Ren, Dilip Madan and Michael Qian Qian show how this can be accomplished, using a…