Volatility: Trading and Managing Risk

London Financial Studies

Short course

In London

£ 3,975 + VAT

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Description

  • Type

    Short course

  • Location

    London

  • Duration

    3 Days

This programme gives you a deep understanding of the key differences between volatility models and their implications for trading and risk management.

The course starts by analysing the role of volatility in current financial markets including the causes and impact of volatility smiles on a variety of financial products. This leads into practical sessions covering techniques for trading volatility, and the application of a range of volatility derivatives such as volatility swaps, volatility futures and volatility options.

The final part of the programme covers the treatment of volatility in the more popular stochastic volatility models used in the industry such as SABR and Heston and provides insights into the most relevant approaches to modelling volatility under current market conditions.

This course is also available remotely via LFS Live.

Facilities

Location

Start date

London
See map
34 Curlew Street, se12nd

Start date

On request

About this course

Derivative traders
Quants and research analysts
Fund managers, fund of funds
Structured product teams
Financial and valuation controllers
Private wealth managers
Risk managers and regulators
Finance directors
Bank and corporate treasury managers

Basic mathematics including the concept of a derivative
Participants should be familiar with the use of Excel

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Reviews

This centre's achievements

2016

All courses are up to date

The average rating is higher than 3.7

More than 50 reviews in the last 12 months

This centre has featured on Emagister for 16 years

Subjects

  • Trading
  • IT risk
  • Risk
  • Options
  • Market
  • Swaps
  • Financial
  • Financial Training
  • Volatility Trading
  • Derivatives
  • Vega convexity
  • Hedging Volatility
  • Market Models
  • Volatility
  • VSTOXX
  • VXX
  • VXZ
  • SABR
  • Volatility Surface
  • Stochastic Alpha
  • Beta
  • Stochastic volatility
  • Managing Risk

Teachers and trainers (1)

Simon Acomb

Simon Acomb

Teacher

Dr Simon Acomb has over 20 years of experience in quantitative finance. He started his career in finance at Barclays deZoete Wedd in 1992 in the Equities Derivatives Group and progressed to run the quantitative research team. This was followed by five years at Commerzbank, where he established a derivatives proprietary trading team and then became head of the equity quantitative research group. Most recently, Simon has been a managing director at Morgan Stanley as global head of the Equities Analytic Modelling Group.

Course programme

Day One

Black Scholes Revisited
  • A quick revision of Black Scholes and Ito lemma
  • Black Scholes Greeks
  • Black Scholes implied volatility and implied risk neutral distributions
  • Examples of derivatives sensitive to the whole volatility surface
  • Motivation for alternatives to Black Scholes and stochastic volatility
Local Volatility
  • Is Local Volatility a stochastic volatility model?
  • Calculating a Local Volatility
  • Implementing Local Volatility models
  • Local Volatility as a conditional expectation of instantaneous volatility
  • Weaknesses of Local Volatility models
Workshop: Calibrating local volatility and pricing a Barrier option

Trading on Realised Volatility
  • Volatility Skew and Smile
  • The Greeks
  • Trading Skew and Kurtosis
  • Trading Implied Volatility
  • Variance Swaps and Volatility Swaps
Workshop: Fitting a volatility surface and pricing a variance swap

Day Two

Heston and the Volatility Surface
  • Looking at volatility dynamics in the real world
  • The Heston equation
  • The role of market price of volatility risk
  • Volatility surface sensitivities to Heston parameters
  • Linking Heston parameters to Black Scholes implied volatilities
  • Implication of the Heston volatility surface dynamics
  • Simulating the Heston process
Workshop: Simulating the Heston dynamics and using it to price a Barrier option

SABR and the Volatility Surface
  • SABR: Stochastic Alpha, Beta and Rho
  • SABR calibration
  • SABR parameters and the volatility surface
  • Sticky strike versus sticky moneyness
  • SABR in interest rate modelling and LMM SABR
Trading on Volatility Indices
  • Volatility indices – VIX and VSTOXX
  • Volatility as an Asset Class – VXX and VXZ
  • Incorporating Volatility into an Investment Portfolio
  • Futures and Options on Volatility Indices
  • The need for a stochastic volatility model
  • Hedging Volatility Indices
Workshop: Finding a risk neutral distribution of volatility

Day Three

Market Models of Volatility
  • Volatility surfaces revisited – extrapolation and interpolation
  • Combining risk neutral distributions with a copula
  • Using volatility smiles and copulae for pricing basket and spread options
  • Dispersion trading
  • Market models of volatility options
  • Arbitrage between volatility options and S&P options
Workshop: Relating VIX options and variance swaps

Hedging Volatility Exposure
  • Hedging volatility exposure of a book of exotic options
  • Static versus Dynamic Hedging
  • Impact of Model choice
  • Smile risk
  • Understanding greeks
  • Vega convexity.
Workshop: Finding the best vega hedge

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