Volatility Pricing, Correlation, and Crypto Options Market Making
Summary
This podcast summary covers derivatives trader Gordon Grant’s discussion of volatility across asset classes and in crypto options. Topics include quoting interest-rate volatility in basis points to compare different tenors, how zero-rate policies can affect skew and convexity, and why correlation behavior matters to volatility pricing, particularly during stressed or unusual market regimes.
The discussion also describes systematic approaches to harvesting volatility risk premia and mean-reversion tendencies, including selling out-of-the-money convexity in yen pairs after the global financial crisis. In crypto options, the account presents Genesis Trading as a principal dealing desk that prices institutional client trades, takes the other side using its capital, and hedges client flow while managing exposure. These are high-level descriptions of practices and market experience, not a reproducible trading specification: the summary provides no trade-level data, performance measures, model details, or evidence that the strategies remain effective across regimes.
Key ideas
- Interest-rate volatility is quoted in basis points to make volatility comparable across tenors.
- Correlation dynamics can influence volatility pricing, especially during extreme market conditions.
- Systematic volatility strategies may seek to capture volatility risk premia and mean-reversion effects.
- A principal options dealing desk can use proprietary capital to facilitate client trades and hedge resulting exposure.
- The document offers practitioner commentary but no quantitative evidence or complete strategy rules.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.