Hi allI've entered MSs degree program in risk management without serious mathematical background. Currently I thinking about my future thesis - what interesting theme to research. I decided to write about IVS as it common thread on this forum. I have several questions concerning this theme (sorry for primitive questions - I'm just start learning quant methods). First of all, could you recommend please how to narrow this theme. I understand why it's importantant to build IVS for pricing options, for as input in SPAN, whats the others practical aspects of modelling IVS. Just I want more intuitive understanding of the IVS. I've serched CBOE websight, websights of options dealers and found particullary no information. Is there some research company that provides daily interpretation of IVS? I will be grateful for any links to clarify why it is so important. I'm reading Jim Gatheral book but its pure math. I think I should do internship in options trading desk to understand all peculiarities of volatility arbitrage strategies based on IVS but It's not the case for me right now, I wasn't able to get such internship. I think without this practical knowledge it's usefulness to take this theme as thesis, right?Second, as I've read articles about IVS my understanding that it is very simple task to build IVS using nonparametric methods that will be good enough. So why then there is so much noise about models for IVS? And what type of data should I use (tick data for sales? bid-ask historical ticks?). How to test that my IVS model predict behaivour good enough?Third, can someone tell what method uses Bloomberg OVDV? And can I somehow get histirical quotes for OTC options using Bloomberg?I have a year and a half to write this thesis - what math subjects should I concentrate on? Numerical methods, fourie transforms, SPDE, dynamical systems...?Sorry for this sillly questions I just want to know why it is important and interesting to model IVS and can I accomplish this task without real trading options?Thanks!

Maybe C.Alexander Market Risk Analysis III vol. with its chapters on options and volatility would be of some help.M.

you have to say what level maths you have.eg do you know engineering-level maths?can you program?probability, statistics, linear algebra, Numerical methods would be useful areas - but it clearly depends what maths you have and what you lack.You might want to look at dan stefanica's book (Wilmott user dstefan)Title: A Primer for the Mathematics of Financial EngineeringAuthor: Dan StefanicaSoftcover: 302 pagesPublisher: Financial Engineering Press (April 4, 2008)ISBN-10: 0979757606Price: USD 55The book is based on material taught in a refresher course to the incoming students of the Financial Engineering MS Program at Baruch College, City University of New York. The author has been the Director of the Baruch MFE program since its inception in 2002. The table of contents and sample sections can be found here.Review on Dominic Connor's blog on Wilmott.com. if you really want to work on IVS, perhaps it might be useful to you to simulate hedging a vanilla options book. This would be more practical than theoretical and might be more to your liking/ability. It will also highlight what is important...you might also look at euan sinclair's book: volatility trading, which looks at identifying discrepancies between historical and implied vols and trading on that. He is not so concerned with the surface ( just single points)