The Term Structure of Volatility and the Volatility Surface

Подписаться 749 тыс.

Просмотров 15 тыс.

50% 1

Today we will learn about the volatility Surface.
These classes are all based on the book Trading and Pricing Financial Derivatives, available on Amazon at this link. amzn.to/2WIoAL0
Check out our website www.onfinance.org/
Follow Patrick on twitter here: / patrickeboyle
The Volatility Surface Explained
The volatility surface is a three-dimensional plot of stock option implied volatility seen to exist due to discrepancies with how the market prices stock options and what stock option pricing models say that the correct prices should be.
Of all the variables used in the Black-Scholes model, the only one that is not known with certainty is volatility. At the time of pricing, all of the other variables are clear and known, but volatility must be an estimate. The volatility surface is a three-dimensional plot where the x-axis is the time to maturity, the z-axis is the strike price, and the y-axis is the implied volatility.
The volatility surface is made up of the volatility smile and the term structure of option volatility.
The volatility surface trading

Опубликовано:

13 мар 2019

Ссылка:

Скачать:

Готовим ссылку...

Добавить в:

Мой плейлист

Посмотреть позже

Комментарии : 15

@patienceobongo Год назад

6 months ago I wouldn't have had a clue what this title meant. Calculating the Compounding Effect of Inflation was such a shock I've had to study the art of shenanigans.

@mikiallen7733 2 года назад

Thanks sir for your efficient use of this 6 minute- clip

@mikiallen7733 2 года назад

Do you happen to know if any results have been concluded as to whether the moneyness factor i.e s/K can reliably explain / anticipate any changes in the underlying security price ? Your answer is highly appreciated thanks

@arus.903 3 года назад

Hi Mr. Patrick, could you check, please, this video isn't working. And thank you for great content available in your channel.

@lividpudding8565 4 года назад

Just found your channel, subscribed! Great content

@PBoyle 4 года назад

Welcome aboard!

@finsgutus Год назад

This was cool! The volatility surface way of looking at the options market really reminds me of how certain phenomena in electrical engineering are reasoned about using mathematical methods and I almost got the urge to go and, say, write a simple algorithm to trade options based on detecting anomalies in the surface (obviously it should account for known events in the time dimension). I'm sure all big investment banks already have such things implemented by teams of people with fancy degrees, but to me this just seems like an interesting thing to fiddle with as a hobby. I wish young me knew economics could be this interesting and perhaps I wouldn't be a bored out engineer today 😅

@DamnDannyTrades 9 месяцев назад

You can still do something! you'd be surprised to know that your engineering knowledge; like mine. Is extremely useful in the trading options world. As long as you can get into the options world and understand it liek you do engineering :).

@MrKing98100 4 года назад

This is a great video! Good stuff!

@PBoyle 4 года назад

Glad you enjoyed it!

@kayjc0975 3 года назад

Volatility surface is a metric like IV ,can I use it on TD AMERITRADE? can I say the if VS is high for the future date around the results date very good results or very bad results are expected ?, How to differentiate if the results are going to be good or bad any supporting METRIC or METRICS we can see and make an educated guess to buy call/ sell puts,buy puts ,sell calls of that option in the future date? Please be honest as much as possible if so ,to ask this question I had to work hard trying to view so many videos , I liked your video the best until now. Along with IV which metric do I see for a reasonable guess ,I understand we never going to 100% correct not even 40% .so looking forward to your expert answer on this.

@roym1444 3 года назад

Patrick I am making a transition from trading manually and manually back-testing to a more quantitative approach. I dont have a background in much of the areas i'm about to encounter can you suggest some fundamental principles I need to grasp before I go racing off into the abyss and becoming lost.

@roym1444 3 года назад

To provide more context , I have mainly been testing a variety of technical indicators (Manually) on In sample data and now only release the significance of using out of sample data in order to ensure my optimization parameters are robust and not just curve fitted to the In sample data. I am currently researching walk forward optimization and building my equity curve with out of sample data. Any guidance would be greatly appreciated.