volatility


Risk Budgets with Target Portfolio Volatility

Question 1 (how to set asset level risk budgets as well as portfolio level target volatility) is discussed in Modern Portfolio Optimization by Bernd Scherer and Douglas Martin in section 3.1.1 on ris... Read More


volatility - HFT to blame for Flash Crashes?

Using months of proprietary data that labels participants by their participant ID, it has been found that during periods of significant volatility, the composition of HFT participants in the book rem... Read More


options - arbitrage free volatility surface

You'll find here that in terms of European option prices , the absence of calendar arbitrage writes $$ \frac{\tilde{C}(k\, F(0,t2),t2)}{F(0,t2)} \geq \frac{\tilde{C}(k \, F(0,t1),t1)}{F(0,t1)}, \fora... Read More


variance - Negative high frequency intraday volatility - Zhou estimator

In any finite sample, it is always possible for the Zhou estimator to return a negative number, even though we know the unobservable parameter being estimated is non-negative. This is a well known is... Read More


Estimate Beta of CAPM from Implied Volatility?

Yes it is a better way. Just take a look to figure 3, from Buss and Vilkov (2012, RFS):... Read More


options - How is volatility different from variance?

Let's skip calling it volatility and variance. Let us deal with variance and standard deviation. For normally distributed variables, it is very important to distinguish between the true variance and... Read More


volatility - Black's Approximation - Discrete dividend for Put Options

In the past few days I tried pricing Put options using other methods other than the Black's approximation. So far i came to the conclusion that the best methods are those presented in Haug "The compl... Read More


volatility - Can classical economics explain *any* of the so-called stylized facts of finance?

I would argue that indeed none of the so-called stylized facts you mentioned can be explained by classical economic theory. That there was a gross delta between the predictions of classical economic... Read More


black scholes - Hedging with different volatility (Ahmad and Wilmott paper)

The choice of hedging strategy cannot affect the expected p/l, because hedging just consists of doing at-market purchases or sales of the underlying, each of which have zero expected value at the tim... Read More


volatility - Science behind options pricing into Earnings event

You discuss the behavior of stock prices after an earnings announcement. There is a significant amount of academic research on this topic (called post-earnings-announcement drift). It basically finds... Read More