Stochastic Volatility Modelling And Arbitrage Opportunities


Objective:

To give an understanding of Stochastic Modelling and the opportunities that can arise.  A mid level quant expertise is assumed.

 

Outline:

- Volatility Modelling: A Review

      Model Requirements What do we look for in a model?

     A Brief History of Volatility Modelling to date

 

- Forward Equations

     The advantages of volatility modelling using forward equations

      Local volatility and Computation Speeds

      How to go about modelling the Forward Equation European Options

      How to go about modelling the Forward Equation American Options

 

- Forward volatility

      The Local Volatility Model Simplicity and Relevance.

      Convexity Bias An Explanation and how to apply to model.

      An Example Locking Forward Variance The Conditional Variance Swap

      Deterministic Future Smiles Sticky Strike and Sticky Delta

      Example of arbitrage with sticky strike

      Local Vols to Implied Vols

      Market Model of Implied Volatility

      Applying the Drift Condition

 

- Modelling smile dynamics and Identifying Arbitrage Opportunities

      Deterministic Future Smiles Sticky Strike and Sticky Delta

      Applying Smile Dynamics: Local Volatility Modelling

      Applying Smile Dynamics: Stochastic Volatility Modelling

      Applying Smile Dynamics: Jump Modelling

      Factoring In Spot Dependency

 

- Final Thoughts and Conclusion




Todays Date:


Duration 1 day
LondonFurther dates available on request
Fee  580 + VAT







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