Volatility Smile Trading

Ilia Bouchouev
Additional contact information
Ilia Bouchouev: Pentathlon Investments, LLC

Chapter 10 in Virtual Barrels, 2023, pp 209-230 from Springer

Abstract: Abstract We study the problem of the volatility smile and the strategy of vega trading. We demonstrate limitations of conventional paradigms to the oil market and use a more flexible framework of diffusion processes. We apply the technique of perturbation methods to develop a novel quadratic normal model. This model corrects the Bachelier formula for skewness and kurtosis with the three model parameters mapped to the three primary option benchmarks in the oil market.

Date: 2023
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:sptchp:978-3-031-36151-7_10

Ordering information: This item can be ordered from
http://www.springer.com/9783031361517

DOI: 10.1007/978-3-031-36151-7_10

Access Statistics for this chapter

More chapters in Springer Texts in Business and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().