Questions tagged [volatility-smile]
The volatility-smile tag has no usage guidance, but it has a tag wiki.
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10D quotes for FX volatility smile calibration
When calibrating fx smile using SABR and Vanna Volga,
Are 10D-RR and 10D-BF used?
Or 25D and ATM quotes are used only?
If 10D is used, which currency pairs use 10D quotes?
If I use 10D quote for ...
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Why do we use OTM options to extract implied vol?
It is often common practice to calculate implied volatility using puts for low strikes and calls for high strikes, so to always employ out-of-the-money options. Why is this often preferred to using ...
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What are common parametric forms for VIX smiles?
It is common in SPX markets to fit smiles using Stochastic volatility-inspired and Surface stochastic volatility-inspired parametric forms introduced by Gatheral and Jacquier (2014). In VIX markets ...
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Volatility Surface Modelling in Python
For my master thesis, I try to create a Volatility Surface for S&P500 Index options. Every time I run my code, the surface I get is full of spikes.
I'm just not sure if these are outliers which ...
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Summarizing the Volatility Skew as a Single Number
Related questions to this topic/subject:
Expressing Volatility Smile as One Number
Volatility skew and how to capture it?
In both posts, the authors/respondents recommend using the second derivative ...
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Functional From to Approximate Volatility Surface
I have a finite difference pricing model and would like to factor in a volatility surface for each underlying equity. However, I have limited data. Essentially I'm just pulling a few implied ...
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What are some effective and easily implementable volatility smile/skew smoothing models?
Inspired by another post on Bakshi et al. (1997), the paper talks about the feasibility of option pricing models, particularly the SVSI-J variant.
I would like to ask the Quant community if there are ...
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GSABR model vs SABR model
I've read about the SABR model for pricing options, however I am told there is a variant called GSABR. Does anyone know how this model differs from the original SABR model?. Any papers would be really ...
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Are there standardized measures to characterize the volatility skew?
Might be too simple a question, but I saw in Gatheral & Jacquier (2014) that commonly used features to match volatility skews are (and then I subsequently ChatGPTed some commonly used industry ...
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Estimating dynamics of volatility surface?
I have a daily time series of volatility smiles for an option contract. How can i calculate whether the smile is sticky strike, sticky delta or something in-between!
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What is the informational content of the volatility skew?
The option-implied volatility is well-known as a measure for the risk-neutral future expected risk for the underlying asset. However, the market prices of options (across different strikes) imply ...
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How is option pricing related to the correlation between implied volatlity and the underlying?
The correlation between the index returns (e.g SPX) and its changes in option-impled volatility (e.g. VIX), is strong, stable and negative (the implied volatility feedback effect). To me at least, it ...
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Future Implied Price from Option Implied Distribution
Been reading on option implied distributions and understand that this can be transformed into a confidence interval/fan chart showing the implied future price.
Was wondering how I could go about doing ...
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Vol Smile Call/Put Wing calibration
Is call/put wing volatility smile calibration approach used in practice? To calibrate an index (SPY) using only more liquid OTM calls/puts, to kind of use an "if" condition on K to S0 to ...
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filtering implied Vol surface for butterfly arbitrage
Suppose I have a volatility surface (matrix in time and strike) but it might have butterfly arbitrage in it. I want to remove nodes from the surface so that the Vol surface is butterfly arbitrage free....
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