Why is volatility skew/smile for long term options flatter compare to short term options?Why doesn't VG flatten volatility skew for short term options?What does it mean to be “long or short in volatility”?Why future (forward) volatility smile is important to path dependent option?volatility skew for lognormal model is flat?Sensitivity of short-term vs long term options' IVVolatility Smile/skew in volatile marketsWhy is there greater demand for OTM and ITM options than for ATM options?Why is the volatility smile so important
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Why is volatility skew/smile for long term options flatter compare to short term options?
Why doesn't VG flatten volatility skew for short term options?What does it mean to be “long or short in volatility”?Why future (forward) volatility smile is important to path dependent option?volatility skew for lognormal model is flat?Sensitivity of short-term vs long term options' IVVolatility Smile/skew in volatile marketsWhy is there greater demand for OTM and ITM options than for ATM options?Why is the volatility smile so important
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Volatility skew/smile for long term options is flatter compared to short term options, could someone help to explain why is that the case? Thanks
volatility implied-volatility volatility-smile volatility-surface
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DomDom
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Volatility skew/smile for long term options is flatter compared to short term options, could someone help to explain why is that the case? Thanks
volatility implied-volatility volatility-smile volatility-surface
asked 9 hours ago
DomDom
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Dom is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
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Volatility skew/smile for long term options is flatter compared to short term options, could someone help to explain why is that the case? Thanks
volatility implied-volatility volatility-smile volatility-surface
asked 9 hours ago
DomDom
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Dom is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
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Volatility skew/smile for long term options is flatter compared to short term options, could someone help to explain why is that the case? Thanks
volatility implied-volatility volatility-smile volatility-surface
volatility implied-volatility volatility-smile volatility-surface
asked 9 hours ago
DomDom
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Dom is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
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asked 9 hours ago
DomDom
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asked 9 hours ago
DomDom
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asked 9 hours ago
DomDom
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asked 9 hours ago
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One possible reason could be jumps. Over the longer maturity, there could be more jumps so the jumps average out in a way; whereas over the short term, a jump can make a bigger difference and hence the risk of jump increases demand.
This reasoning is used to justify Stochastic volatility with jumps models in some books.
answered 8 hours ago
Magic is in the chainMagic is in the chain
3,1041 gold badge4 silver badges8 bronze badges
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A nice reference which uses this very reasoning is Jim Gatheral's The Volatility Surface (Chapter 5). It presents data supporting the claim that jumps improve the pricing of short term options.
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– KeSchn
8 hours ago
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1 Answer
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1 Answer
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$begingroup$
One possible reason could be jumps. Over the longer maturity, there could be more jumps so the jumps average out in a way; whereas over the short term, a jump can make a bigger difference and hence the risk of jump increases demand.
This reasoning is used to justify Stochastic volatility with jumps models in some books.
answered 8 hours ago
Magic is in the chainMagic is in the chain
3,1041 gold badge4 silver badges8 bronze badges
$endgroup$
2
$begingroup$
A nice reference which uses this very reasoning is Jim Gatheral's The Volatility Surface (Chapter 5). It presents data supporting the claim that jumps improve the pricing of short term options.
$endgroup$
– KeSchn
8 hours ago
add a comment
|
$begingroup$
One possible reason could be jumps. Over the longer maturity, there could be more jumps so the jumps average out in a way; whereas over the short term, a jump can make a bigger difference and hence the risk of jump increases demand.
This reasoning is used to justify Stochastic volatility with jumps models in some books.
answered 8 hours ago
Magic is in the chainMagic is in the chain
3,1041 gold badge4 silver badges8 bronze badges
$endgroup$
2
$begingroup$
A nice reference which uses this very reasoning is Jim Gatheral's The Volatility Surface (Chapter 5). It presents data supporting the claim that jumps improve the pricing of short term options.
$endgroup$
– KeSchn
8 hours ago
add a comment
|
$begingroup$
One possible reason could be jumps. Over the longer maturity, there could be more jumps so the jumps average out in a way; whereas over the short term, a jump can make a bigger difference and hence the risk of jump increases demand.
This reasoning is used to justify Stochastic volatility with jumps models in some books.
answered 8 hours ago
Magic is in the chainMagic is in the chain
3,1041 gold badge4 silver badges8 bronze badges
$endgroup$
One possible reason could be jumps. Over the longer maturity, there could be more jumps so the jumps average out in a way; whereas over the short term, a jump can make a bigger difference and hence the risk of jump increases demand.
This reasoning is used to justify Stochastic volatility with jumps models in some books.
answered 8 hours ago
Magic is in the chainMagic is in the chain
3,1041 gold badge4 silver badges8 bronze badges
answered 8 hours ago
Magic is in the chainMagic is in the chain
3,1041 gold badge4 silver badges8 bronze badges
answered 8 hours ago
Magic is in the chainMagic is in the chain
3,1041 gold badge4 silver badges8 bronze badges
answered 8 hours ago
Magic is in the chainMagic is in the chain
3,1041 gold badge4 silver badges8 bronze badges
3,1041 gold badge4 silver badges8 bronze badges
2
$begingroup$
A nice reference which uses this very reasoning is Jim Gatheral's The Volatility Surface (Chapter 5). It presents data supporting the claim that jumps improve the pricing of short term options.
$endgroup$
– KeSchn
8 hours ago
add a comment
|
2
$begingroup$
A nice reference which uses this very reasoning is Jim Gatheral's The Volatility Surface (Chapter 5). It presents data supporting the claim that jumps improve the pricing of short term options.
$endgroup$
– KeSchn
8 hours ago
2
2
$begingroup$
A nice reference which uses this very reasoning is Jim Gatheral's The Volatility Surface (Chapter 5). It presents data supporting the claim that jumps improve the pricing of short term options.
$endgroup$
– KeSchn
8 hours ago
$begingroup$
A nice reference which uses this very reasoning is Jim Gatheral's The Volatility Surface (Chapter 5). It presents data supporting the claim that jumps improve the pricing of short term options.
$endgroup$
– KeSchn
8 hours ago
add a comment
|
Dom is a new contributor. Be nice, and check out our Code of Conduct.
Dom is a new contributor. Be nice, and check out our Code of Conduct.
Dom is a new contributor. Be nice, and check out our Code of Conduct.
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