Thesis Topics on Implied Volatility and Interest Rate Models

Summary

The discussion suggests research topics for a finance thesis at the beginning of master’s level. One direction is to study how option implied volatility and skewness can help estimate market betas or expected returns. The cited examples cover equity risk measured through option-implied correlations, the skew risk premium in equity index options, expected stock returns, and the term structure of systematic risk.

A second direction is to review how interest rate models such as SABR and LMM handle negative rates. The thread offers topic ideas rather than a developed research plan: it provides no methods, data, comparative findings, or evaluation of feasibility. A student would need to narrow one idea into a specific question and assess what literature, data, and modeling work it requires. The suggestions span equity options and interest rate derivatives, so the choice depends on the intended market and mathematical scope.

Key ideas

• Option implied volatility and skewness can be investigated as inputs for estimating market betas or expected returns.
• Option-implied correlations offer a possible angle for measuring equity risk.
• The skew risk premium in equity index options is another suggested research topic.
• A literature review could compare how SABR, LMM, and related models address negative interest rates.

Tags

# Interesting Undergrad Thesis


# Interesting Undergrad Thesis












I'm searching for an undergrad thesis in finance. I already have some ideas, but still wanted to ask: Is there a an interesting topic that jumps to your mind, when you think about implied volatility (difficulty: beginning of master)?

Thanks in advance

Cheers

Mike

## Answer by phdstudent (score 4, accepted)

https://quant.stackexchange.com/a/49221

I do not think this is allowed in this forum, but anything that has to do with using option implied volatility and skewness to estimate market betas or expected returns.

Here's a few references:

- Measuring Equity Risk with Option-implied Correlations

- The Skew Risk Premium in the Equity Index Market

- What is the Expected Return on a Stock?

- The Term-Structure of Systematic Risk

## Answer by Dimitri Vulis (score 3)

https://quant.stackexchange.com/a/49220

A comprehensive review of how people deal with negative interest rates in SABR / LMM and similar models could make a good thesis.

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