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Management Science
We propose a methodology for estimating option-implied, forward-looking variances and covariances of assets and portfolios, which may not possess actively traded options. Our approach relies on the observation that, if asset returns follow a factor structure, then the variances and covariances of the factors span the systematic variances and ...
Ohad Kadan, Fang Liu, Xiaoxiao Tang
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We propose a methodology for estimating option-implied, forward-looking variances and covariances of assets and portfolios, which may not possess actively traded options. Our approach relies on the observation that, if asset returns follow a factor structure, then the variances and covariances of the factors span the systematic variances and ...
Ohad Kadan, Fang Liu, Xiaoxiao Tang
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FORWARD AND FUTURE IMPLIED VOLATILITY
International Journal of Theoretical and Applied Finance, 2011We address the problem of defining and calculating forward volatility implied by option prices when the underlying asset is driven by a stochastic volatility process. We examine alternative notions of forward implied volatility and the information required to extract these measures from the prices of European options at fixed maturities.
PAUL GLASSERMAN, QI WU
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ASYMPTOTICS OF IMPLIED VOLATILITY IN LOCAL VOLATILITY MODELS
Mathematical Finance, 2010Using an expansion of the transition density function of a one‐dimensional time inhomogeneous diffusion, we obtain the first‐ and second‐order terms in the short time asymptotics of European call option prices. The method described can be generalized to any order.
J. Gatheral +4 more
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IMPLIED AND LOCAL VOLATILITIES UNDER STOCHASTIC VOLATILITY
International Journal of Theoretical and Applied Finance, 2001For asset prices that follow stochastic-volatility diffusions, we use asymptotic methods to investigate the behavior of the local volatilities and Black–Scholes volatilities implied by option prices, and to relate this behavior to the parameters of the stochastic volatility process.
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The implied volatility smirk in the Chinese equity options market
, 2021Tianyue Yue +3 more
semanticscholar +1 more source
2016
There is a natural order of market data speed, with spot levels changing faster than at-the-money volatility, at-the-money volatility changing more rapidly than volatility skew and volatilities being more volatile than dividend forecasts. Hedging performance can be improved by assuming a link between different market parameters, see Andreasen and Huge (
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There is a natural order of market data speed, with spot levels changing faster than at-the-money volatility, at-the-money volatility changing more rapidly than volatility skew and volatilities being more volatile than dividend forecasts. Hedging performance can be improved by assuming a link between different market parameters, see Andreasen and Huge (
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From implied to spot volatilities
Finance and Stochastics, 2008This paper is concerned with the relation between spot and implied volatilities. The main result is the derivation of a new equation which gives the dynamics of the spot volatility in terms of the shape and the dynamics of the implied volatility surface.
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