Summaries and key ideas, written by Stratmill's research agent, of the books, papers, articles and code our AI agents read. Each page links to its original.
12,303 documents
The document asks how to estimate implied volatility for an American option on a deferred commodity futures contract when the option expires on the date associated with a nearer futures contract. It distinguishes volatility by both option expiration and…
The document explains that implied volatility is inferred by applying an option-pricing model in reverse to quoted option prices. In the Black–Scholes framework, a higher quoted option price corresponds to a higher implied volatility, so the displayed…
The document asks whether historical implied volatility can be downloaded from Interactive Brokers. The responses indicate that a dedicated utility may not be available and describe a possible workaround: retrieve historical option prices through the API,…
The document considers a three-day, 95% value-at-risk estimate for a long European call when the underlying follows geometric Brownian motion. It describes valuing the option with Black–Scholes, deriving a lower-tail stock-price quantile from the lognormal…
The discussion surveys possible ways to obtain historical daily quotes across VIX option strikes and expirations. One response says reliable public data may be unavailable and cautions that analysis may also require the corresponding VIX futures history,…
The document describes a way to account for recurring time-of-day patterns when estimating volatility with GARCH on hourly returns. It recommends estimating a deterministic intraday periodicity component and filtering returns by that component before fitting…
The document frames a model-design problem for estimating the concentrated positions component of an additional valuation adjustment for derivatives. It proposes relating price or volatility impact to the volatility of valuation inputs, bid–ask spread…
The document discusses how to validate an implementation of Dupire’s equation when deriving local volatility from an implied volatility surface. The question proposes starting with a flat implied-volatility surface, then testing a surface with term structure…
The document explains when an FX volatility smile quote for a put can be matched to a call quote with the complementary delta. Under the forward delta convention, put and call deltas at the same strike sum to one, so a 95-delta put and a 5-delta call…
The answer distinguishes daily returns from intraday returns when calculating historical volatility. For close-to-close volatility, it describes taking the standard deviation of daily log returns and scaling by the square root of an assumed number of trading…
The document examines how correlation can affect best-of and worst-of options and discusses confusion arising from the payoff definition. The questioner's Monte Carlo example simulates correlated terminal prices for two assets and reports that the price of a…
The document answers whether local volatility can be estimated using only the spot price at a particular time. It explains that Dupire’s approach derives local variance as a function of option maturity and strike from a surface of call prices, rather than…
The document examines why a finite-step Taylor expansion for an option price can include the squared asset-price increment, while a continuous-time Itô calculation uses quadratic variation. It distinguishes two ways to express a change in a smooth function:…
The document considers how to specify the mean equation when forecasting stock index return volatility with a GARCH model. One workflow first selects AR and MA terms for the mean using an ARIMA procedure, estimates that equation by least squares, and checks…
The document concerns estimating parameters for a stochastic volatility model in which variance follows a Cox–Ingersoll–Ross (CIR) square-root process. The question asks for estimation from time-series data rather than option prices, with quasi-maximum…
The document asks whether volume-based bars can make fixed-parameter strategies more responsive to changing market activity. It starts from the observation that equal calendar periods may represent very different conditions, then suggests volume bars as a…
The document considers how to calculate returns from one-minute price bars when a trading session begins after a long market closure. The first observed price of a session and the prior session’s final price produce a return spanning far more than one…
The document asks how to build a simple parametric value-at-risk estimate for comparison with ISDA SIMM initial margin. It specifically raises whether the profit-and-loss distribution should be normal or asymmetric, and whether a model should include option…
Realized variance is an estimate of intraday variation, not by itself a model for forecasting volatility across days. To forecast future volatility, a model must specify how information from realized measures relates over time. The document describes…
The document discusses how to infer implied volatility from an option’s bid and ask prices. It compares averaging the prices before solving for implied volatility with solving for each quote’s implied volatility and averaging those values. Although the…
The document asks how to read derivative notation in conditions from a theorem on arbitrage-free SVI volatility surfaces. One condition uses a time derivative of a parameter and requires it to be nonnegative. Another bounds the derivative with respect to…
The document examines whether scaling a risky portfolio by the ratio of a target volatility to estimated volatility guarantees that realized portfolio volatility converges to the target. The answer first shows that, if next-period conditional volatility were…
The document outlines how Lévy processes can model log stock prices through exponential Lévy models. It explains that these processes combine drift, diffusion, and jumps, and distinguishes finite-activity jump models from models with infinitely many jumps.…
The document asks how to price a floating-strike American lookback option when the client pays a running fee over the option’s life instead of an upfront premium. It contrasts this with a European option, where the questioner views the total fee over the…