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by fomisha
November 30th, 2020, 6:17 pm
Forum: Technical Forum
Topic: American Implied Volatility from quotes
Replies: 12
Views: 1468

Re: American Implied Volatility from quotes

If you need fully automated vol surface calibration from option prices which is fast, reliable, bias-free and arb-free, works with cash dividends and has any other industry standard bells and whistles (vol time, microprices, temporal filtering etc) you should check out Vola Dynamics . PS. Disclaimer...
by fomisha
July 29th, 2020, 5:10 pm
Forum: Technical Forum
Topic: Options when there's no VolSurf - Emerging/Frontier Markets
Replies: 10
Views: 1621

Re: Options when there's no VolSurf - Emerging/Frontier Markets

For formal methods you can search for utility indifference pricing.
by fomisha
July 29th, 2020, 5:07 pm
Forum: Technical Forum
Topic: Options when there's no VolSurf - Emerging/Frontier Markets
Replies: 10
Views: 1621

Re: Options when there's no VolSurf - Emerging/Frontier Markets

The general principle is that you should price the risk factors you can hedge at the price of hedging plus the cost of doing business and the risks you cannot hedge at the unbiased estimate under P measure plus the cost of capital associated with holding the corresponding risk. If you are a market m...
by fomisha
July 17th, 2020, 11:26 pm
Forum: Trading Forum
Topic: When to sample data for IV Curve
Replies: 4
Views: 3716

Re: When to sample data for IV Curve

There are several ways to address this problem, some work only in HFT context while other are applicable at the level of snapshot data as well.
PM me if you want to discuss.
by fomisha
July 17th, 2020, 9:29 pm
Forum: Technical Forum
Topic: Interpolation of a Implied Volatility Surface
Replies: 18
Views: 4844

Re: Interpolation of a Implied Volatility Surface

If you need an industrial-strength solution you can check out Vola Dynamics (disclaimer - I am affiliated).

Here is an example of a fully automated fit right before Brexit:

https://www.voladynamics.com/marketIndexEU_AEX.html

The fits are parametric, arb-free, very robust, and fairly fast.
by fomisha
February 21st, 2020, 12:14 am
Forum: General Forum
Topic: Creating volatility term structure
Replies: 2
Views: 3651

Re: Creating volatility term structure

What's the definition of "equivalent volatility"?
What are you trying to achieve?
by fomisha
February 11th, 2020, 3:34 pm
Forum: Technical Forum
Topic: option delta
Replies: 13
Views: 5127

Re: option delta

It can be below 0 or above 1.

On the subject of delta calculation take a look at this article:
https://www.linkedin.com/pulse/spot-vol ... y-klassen/
by fomisha
February 11th, 2020, 3:20 pm
Forum: Technical Forum
Topic: Var swap and Vol swap
Replies: 2
Views: 3998

Re: Var swap and Vol swap

Do a simple exercise. Calculate how much you will lose on 100K short vega sold at 10 which realizes 100.

Var swaps are easy to price and replicate. Vol swaps don't have extreme payoffs in the tails but are model dependent and do not have static hedges.
by fomisha
April 23rd, 2019, 2:43 pm
Forum: Technical Forum
Topic: Recovery of density functions from call/put prices
Replies: 18
Views: 8302

Re: Recovery of density functions from call/put prices

EAZL, conceptually the problem does not sound hard. However, the devil is in the details. Production quality implementation involves many steps. The set of issues is somewhat different for liquid and illiquid names. Vola Dynamics offers a very comprehensive and robust solution to the problem of cali...
by fomisha
March 2nd, 2019, 12:38 am
Forum: Trading Forum
Topic: VIX to Option Pricing Heuristics?
Replies: 5
Views: 4448

Re: VIX to Option Pricing Heuristics?

A good starting point would be VIX white paper and a primer on var swaps.
by fomisha
March 2nd, 2019, 12:27 am
Forum: Trading Forum
Topic: Sticky Strike or Sticky Delta
Replies: 2
Views: 4227

Re: Sticky Strike or Sticky Delta

Both sticky strike and sticky delta assumptions lead to arbitrage (see this https://math.unice.fr/~diener/nicemathfi03/Bruno_Dupire_vol_presentation_1302c.ppt ). Both sticky strike and sticky delta are not consistent with how implied volatilities move in liquid competitive markets (btw, which underl...
by fomisha
May 23rd, 2018, 6:22 pm
Forum: Trading Forum
Topic: Volatility Swap Hedging
Replies: 18
Views: 3281

Re: Volatility Swap Hedging

We don't have any paper in the public domain at the moment. There are several components which are important: 1) Robust fitting of parametric bias-free and arbitrage volatility surfaces. With a vol surface one can price a log contract. 2) Estimation of the distribution for the variance.  3) Volatili...
by fomisha
May 22nd, 2018, 8:03 pm
Forum: Trading Forum
Topic: Volatility Swap Hedging
Replies: 18
Views: 3281

Re: Volatility Swap Hedging

What are the hedging methods for volatility swap (rather than variance swap)? What are the possibilities of setting up a static, semi-static or dynamic hedging?  Check out this post on consistent valuation and risk management of vol derivatives and vanilla options: https://www.linkedin.com/pulse/vo...
by fomisha
October 24th, 2017, 9:36 pm
Forum: General Forum
Topic: Splitting data according to distribution moments
Replies: 11
Views: 1619

Re: Splitting data according to distribution moments

I am interested to take price (or rather, returns) data and divide it to n periods, according to distribution moments, in a way that will create the best separation. How do you approach that?
what is the metric by which different classifications will be compared? what are you trying to accomplish?
by fomisha
October 24th, 2017, 4:54 pm
Forum: General Forum
Topic: Equity Forward with cash dividends and stock lending
Replies: 2
Views: 944

Re: Equity Forward with cash dividends and stock lending

take a look at the paper on dividend modeling from here
https://www.voladynamics.com/research.html
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