vol of vol

GiacomoGalli · April 6th, 2004, 1:27 pm

what's the vol of vol, and how do u use it in the calibration process?thanksJ

SPAAGG · April 6th, 2004, 1:33 pm

If you assume that the volatility is a stochastic process, then you could write:dV=f(V,t)dt+VolVol(V,t)dB, where B is a BMthe VolVol(V,t) is the volatility of your volatility, i.e. measure the uncertainty of the volatility process

cvz · April 6th, 2004, 2:05 pm

Calibration of what? I use it to calibrate my forward vol model, but that seems like a tautology.

GiacomoGalli · April 6th, 2004, 2:35 pm

u right CVZ, to calibrate my forward vola model i'm used to estimate sigma, theta, kappa, volvol and rho, but i don't understand the meaning of vol of vol.--------------------------------------thanks SPAAG for replyingi'll work on that!j

NorthernJohn · April 6th, 2004, 3:02 pm

QuoteOriginally posted by: GiacomoGalliu right CVZ, to calibrate my forward vola model i'm used to estimate sigma, theta, kappa, volvol and rho, but i don't understand the meaning of vol of vol.--------------------------------------thanks SPAAG for replyingi'll work on that!jVol of vol is a measure of how much implied volatility will move over the life of the trade.If something is quoted with a normal vol of 1.3% today, we know that its vol will move over time, and we measure its spread with vol of vol.

GiacomoGalli · April 6th, 2004, 3:37 pm

thanks

GiacomoGalli · April 7th, 2004, 4:54 am

Any paper concerning the volatility model calibration and its parameters?thanksJ

cvz · April 7th, 2004, 4:11 pm

This paper contains a survey of four stochastic vol models, in addition to a discussion of volatility option pricing.

GiacomoGalli · April 8th, 2004, 5:22 am

thanks so much mate

lenni · October 26th, 2006, 2:29 pm

does anybody have a copy of this paper? the link doesn't seem to be working anymore.thanks