Technical paper/Implied volatility
An approximate solution for options market-making
An algorithm for the market-making of options on different underlyings is proposed
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.
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
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…
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
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…
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.
Discrete time stochastic volatility
Quant proposes faster model to price arbitrage-free swaptions
Reflections on recent volatility
This paper deals with the unprecedented equity volatility in the second week of February 2018. The paper recaps the week, places the market movement in a historical context, discusses how some traders and funds were affected and offers a few guesses as…
The impact of unconventional monetary policy shocks on the crude oil futures market
This paper examines how West Texas Intermediate (WTI) crude oil price returns and volatilities respond to changes in US monetary policy.
A quick tool to forecast value-at-risk using implied and realized volatilities
The authors propose a naive model to forecast ex ante value-at-risk (VaR), using a shrinkage estimator between realized volatility estimated on past return time series as well as implied volatility quoted in the market.
‘Hot-start’ initialisation of the Heston model
Serguei Mechkov initialises Heston model’s parameters using probability distributions
Isolating a risk premium on the volatility of volatility
Lorenzo Ravagli shows how to exploit a risk premium embedded in the vol of vol in out-of-the-money options
Quantized calibration in local volatility
Quantization is applied to price vanilla and barrier options
Heston model: shifting on the volatility surface
Stochastic volatility model combining Heston vol model and CIR++
Local correlation families
Local correlation families
Hybrid smiles made fast
Hybrid smiles made fast
SABR spreads its wings
SABR spreads its wings
Cutting Edge introduction: Continuity error
Continuity error