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quantie


Total Posts: 883
Joined: Jun 2004
 
Posted: 2013-03-26 01:41
>>furrther, this sort of decomposition isn't totally unknown to traders. actually, i would think FX traders >>would have been very well aware of the ideas.

yes think you mean carr's vanna-volga model have seen a note on bbg terminal(from PCarr) formalizing this market practice.

granchio


Total Posts: 1530
Joined: Apr 2004
 
Posted: 2013-03-26 11:49
quantie: yes think you mean carr's vanna-volga model have seen a note on bbg terminal(from PCarr) formalizing this market practice
Most likely - though as strange implied, vanna-volga has been around a long time and is not particularly interesting.
IMHO the interesting stuff is related to the Carr Wu paper I mentioned below, but it's more about volsurface fitting than trading strategies.

"Deserve got nothing to do with it" - Clint

alexandergir


Total Posts: 21
Joined: Dec 2007
 
Posted: 2013-03-27 15:47
Given anyone who has a qualified opinion prefers to keep her joy to herself let me roll out my 1c of history: Aforementioned Carr&co was written after Carr&co got their hands on referenced by them unpublished Khoury&Eid DB writeup “The Gamma Vanna Volga Cost Framework" and Carr&co expectedly added little value aside from actually publishing the result (which is sure compensated by the usual level of irrelevant obscurity). Yes Carr/DB implies she can through her garbage parametric, spline, Kalman fits into trash can but with a bit of vision she can see it is of course just a tip of the iceberg, holy grail of Carr/DB is basically that smile is a very simple thing if she looks at it in the right way and this holy grail implies change to the way of everything she does with the smile (from EMM to EXO). You bet it didn't went unnoticed by top electronic options market making businesses and others, small revolution quietly happened.

My personal modest contribution was purely educational i.e. to bring already published (Carr&co) or known stuff (DB) to more general audience, and though imho MS has little to claim here I kindly request to respect my current agreement with them and not to distribute my writeup instead referring interested to Carr&co.

radikal


Total Posts: 253
Joined: Dec 2012
 
Posted: 2013-07-13 04:31
Too bad, sounded interesting. Was the Khoury and Eid paper buried too?

There are no surprising facts, only models that are surprised by facts

GeekySerge


Total Posts: 39
Joined: Apr 2010
 
Posted: 2013-08-08 00:47
May I have a copy of the paper please?
geekysergegmailcom

ahtry


Total Posts: 2
Joined: Oct 2010
 
Posted: 2013-09-09 12:44
May I have a copy too?
ahtry @ hotmail . co . uk

alexandergir


Total Posts: 21
Joined: Dec 2007
 
Posted: 2013-10-24 23:11
New somewhat related paper by carr on this
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2342894

enjoyTrading


Total Posts: 1
Joined: Jan 2014
 
Posted: 2014-01-03 06:12
hi~would you please specify the published paper's name of Carr? I am new to this field:) 3x!

harmonic


Total Posts: 2
Joined: Sep 2008
 
Posted: 2014-07-16 03:11

Martin Andersson proves that Carr/Wu's model is not arbitrage free for extreme strikes.

http://www.math.chalmers.se/~palbin/MartinAndersson.pdf


alexandergir


Total Posts: 21
Joined: Dec 2007
 
Posted: 2015-03-25 19:51
No need to prove anything for something that does not even fit, Carr/Wu version and subsequent Carr/Sun modification which was available but later retracted (as it was a bit more practical in opinion of interested MS people i guess) from ssrn (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2342894) are garbage as pretty much anything coming from Carr anyways.

Meanwhile the working version (which is as arb free in the wings as it gets) spread out across the street and buy side shops (by way of JPM folks who were the first adopters) and is used widely now according to my various contacts.

What a shame we have to keep a simple piece of math hidden, while it is a well known secret to professionals.

I want once again to pay honor to original authors of the small inspirational note
M. Arslan, G. Eid, J. El Khoury and J. Roth
The Gamma-Vanna-Volga Cost Framework for Constructing Implied Volatility Curves

all of whom I know and many of those afterwards (at JPM and beyond) who helped to make working thing out of an inspirational idea and first time since 1973 properly linked volatilities/options across strikes and expirations.

pj


Total Posts: 3316
Joined: Jun 2004
 
Posted: 2015-03-25 20:02
@ alexandergir
> M. Arslan, G. Eid, J. El Khoury and J. Roth
>The Gamma-Vanna-Volga Cost Framework for
> Constructing Implied Volatility Curves
Do you have a pdf by any chance?

OFFENDERS WILL BE TERMINATED

radikal


Total Posts: 253
Joined: Dec 2012
 
Posted: 2015-03-27 01:11
I'm interested as well -- never was able to find it in the past.

There are no surprising facts, only models that are surprised by facts

il_vitorio


Total Posts: 103
Joined: Aug 2014
 
Posted: 2015-03-27 02:36
I am indeed in line for it!

One of my most productive days was throwing away 1000 lines of code.

a路径积分


Total Posts: 77
Joined: Dec 2014
 
Posted: 2015-03-29 00:22
I've seen Arslan et al's GVV paper, most of it was rendered obsolete with a novel approach that is going around the street (I heard this went around after some chain of talent-poaching from Optiver). Shame that MS wouldn't let you publish something simple and that is no longer in use where it matters.

il_vitorio


Total Posts: 103
Joined: Aug 2014
 
Posted: 2015-03-29 14:36
Could you paraphrase (in case there is also legal stuff involved) the new approach?


One of my most productive days was throwing away 1000 lines of code.

pj


Total Posts: 3316
Joined: Jun 2004
 
Posted: 2015-03-29 16:39
Hmm, that's interesting.
Recently Gatheral was presenting his SVI model and mentioned
that Optiver was using some awful shit, and, since, they
were big it worked.
Could you supply with, at least, a hint?


OFFENDERS WILL BE TERMINATED

alexandergir


Total Posts: 21
Joined: Dec 2007
 
Posted: 2015-03-30 00:59
hehe, nice optiver, blatant bsing does not add credibility to your recruiting efforts.
For more details on awesome volatility models please contact optiver campus recruiter:
a路径积分
littlecrimsongirlgmailcom

zukimaten


Total Posts: 1
Joined: Apr 2015
 
Posted: 2015-04-23 13:11
If anyone has access I would really love to see either or both the mentioned paper and the note.

gergely


Total Posts: 27
Joined: Sep 2007
 
Posted: 2015-04-24 14:33
"If anyone has access I would really love to see either or both the mentioned paper and the note."

Same here.

KiwiFi


Total Posts: 3
Joined: Jun 2014
 
Posted: 2015-05-12 10:35
Any chance I can also get a copy

Thank you all

KiwiFi


Total Posts: 3
Joined: Jun 2014
 
Posted: 2015-05-15 00:00
Sorry this request with an email address

timandkatiefromnz at gmail dot com

alexandergir


Total Posts: 21
Joined: Dec 2007
 
Posted: 2015-06-20 03:35
Just saw Lorenzo Bergomi Global Derivs May 2015 presentation "The local volatility model".

"Practically usable market models", "breakeven covariance matrix", "market model", "mismatch between model & realized covariances", "Implied break-even levels of cross-gammas are payoff -independent - are determined by market smile prevailing at time t." are all the terms he uses to describe we know what.

As I suppose "Quants of the year" are supposed to do (not peer reviewed physics anymore indeed) he conveniently forgets where he learned it all from but stay tuned as "Material of this presentation part of forthcoming book".

All in all presentation is good but very specific to "exotics", "local vol" and that stuff. Not for general vanillas trading, market making and risk management. And there is second part of it "Local/stochastic volatility models { and non-models" again very specific to exo folks.

aurthes


Total Posts: 1
Joined: Jul 2015
 
Posted: 2015-07-10 21:40
Can I please have a copy? thanks!

aurthes at gmail dot com

chiral3
Founding Member

Total Posts: 4984
Joined: Mar 2004
 
Posted: 2015-07-10 22:04
I don't need the materials but can you provide some more context? I used his well known smile dynamics results a while back, developed all the results, etc. I cared about pricing forward vol well. In the end I came up with my own "brute force" / practical methods that worked better and were easier to implement (and explain, not dealing with French engineers all the time).

Nonius is Satoshi Nakamoto. 物の哀れ

alexandergir


Total Posts: 21
Joined: Dec 2007
 
Posted: 2015-07-11 17:34
Are you talking about Bergomi or other stuff?
Re Bergomi, it is definitely genuine and not without interest and definitely above the rest of "stochastic stuff" i have seen in equity derivs. That said even when i was in eq derivs business i was not sure how to extract any value out of it and never used it. The recent two presentations are extracting implied covariances for local vol model and for some stochastic models and try to make sense of them.
I talked to him and i think i overreacted a bit in the previous post, his general life philosophy which was made very clear to me and that makes zero sense to me is that you want to assume model/dynamics and see what implied covariances are. Obviously that would be rough approximation to market which would not work very well for short term, etc. But in his opinion this is just because market is wrong. Impliying covariances from market to him is poor man approach. To me this all sounds like approach based on lack of trading experience and lack of looking beyond equity indices (lack of looking at different assets). Hope i am answering the right question here.
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