Technical paper/Implied volatility
The power of neural networks in stochastic volatility modeling
The authors apply stochastic volatility models to real-world data and demonstrate how effectively the models calibrate a range of options.
Rethinking P&L attribution for options
A buy-side perspective on how to decompose the P&L of index options is presented
Volatility shape-shifters: arbitrage-free shaping of implied volatility surfaces
Manipulating implied volatility surfaces using optimal transport theory has several applications
Joint S&P 500/VIX smile calibration in discrete and continuous time
An arbitrage-free model for exotic options that captures smiles and futures is presented
Neural joint S&P 500/VIX smile calibration
A one-factor stochastic local volatility model can solve the joint calibration problem
Refined analysis of the no-butterfly-arbitrage domain for SSVI slices
The authors investigate the surface SVI model with three with three parameters, applying the SVI results to give the nobutterfly- arbitrage domain
Analytic risk-free rates option pricing with smile and skew
An arbitrage-free short-rate model for backward-looking compounded rates is presented
Smile-consistent basket skew
An analytic approximation for the implied volatility surface of basket options is introduced
A robust stochastic volatility model for interest rates
A swaption pricing model based on a single-factor Cheyette model is shown to fit accurately
Does the term structure of the at-the-money skew really follow a power law?
A power law can fit the ATM skew, but struggles with short maturities
Obtaining arbitrage-free FX implied volatility by variational inference
An ML-based algorithm that provides implied volatilities from bid-ask prices is proposed
The quintic Ornstein-Uhlenbeck model for joint SPX and VIX calibration
A new model that jointly fits the smiles of VIX and SPX is presented
Trading the vol-of-vol risk premium
Applications of the vol-of-vol parameter for cross-asset derivatives are presented
Analytical conversion between implied volatilities based on different dividend models
The authors propose an explicit formula for the conversion of implied volatilities corresponding to dividend modelling assumptions which covers a wide range of strikes and maturities.
Sculpting implied volatility surfaces of illiquid assets
From the stock cumulative distribution function an arbitrage-free volatility surface is derived
Deep calibration of rough volatility models
Rough vol models are calibrated and fitted to SPX and Vix smiles
Future portfolio returns and the VIX term structure
The authors use a measure that captures the expected evolution of risk and generate results supportive of the concept that there are multiple facets within volatility risk that are priced individually.
Linking performance of vanilla options to the volatility premium
A framework to account for vanilla options' performance in trading strategies is presented
Swap rate: cash-settled swaptions in the fallback
A fallback pricing method that reduces vanilla swaptions’ complexity is introduced
The future of skew
Forward start volatility swaps and their pricing and hedging models are introduced
Estimating value-at-risk using quantile regression and implied volatilities
In this paper the authors propose a semi-parametric, parsimonious value-at-risk forecasting model based on quantile regression and readily available market prices of option contracts from the over-the-counter foreign exchange interbank market.