According to rational expectation models, uninformed or liquidity trading make market price
volatility rise. This paper sets out to analyse the impact of herding, which may be interpreted …

Using data from 35 futures options markets from eight separate exchanges, we test how well
the implied volatilities (IVs) embedded in option prices predict subsequently realized …

Regulations allow market makers to short sell without borrowing stock, and the transactions
of a major options market maker show that in most hard-to-borrow situations, it chooses not …

Analysts are accustomed to using prices for the information they contain. A stock price, for
example, can be thought of as an expected value of future cash flows. Each futures price …

Recent evidence suggests that the parameters characterizing the implied volatility surface
(IVS) in option prices are unstable. We study whether the resulting predictability patterns …

Yet that weakness is also its greatest strength. People like the model because they can
easily understand its assumptions. The model is often good as a? rst approximation, and if …

We examine the risk neutral probability density (RND) for the S&P 500 extracted from real-
time bid and ask quotes for index options, under extreme market stress during the fall of …

The literature on volatility modelling and option pricing is a large and diverse area due to its
importance and applications. This paper provides a review of the most significant volatility …

It is common practice to identify the number and sources of shocks that move, eg, ATM
implied volatilities by principal components analysis. This approach, however, is likely to …

This paper provides an industry standard on how to quantify the shape of the implied
volatility smirk in the equity index options market. Our local expansion method uses a …