Venue: Numerical methods and error analysis for singular integrals and moving interfaces in fluids

Speaker: Dr. Christopher Ting

Time: 29 February 2012,16:00-17:00

Location: Room 201, Sir Run Run Shaw Business Adminisration Building, Yuquan Campus

Abstract: In this talk, I present an improved method to obtain the model-free volatility more accurately despite the limitations of a small number of options and a large interval of strike prices. The method enables a study of the term structure of model-free volatilities over a long horizon for the first time. We apply the method on the European-style S&P 100 index options and find a number of interesting results concerning  the model-free volatilities at near term versus those at far term.  I also discuss a model to back out an implied co-volatility from the quanto spread between two futures contracts. The empirical evidence suggests that,  compared to historical co-volatility, the implied co-volatility provides a better forecast of the co-volatility between an equity index and the dollar-yen exchange rate. Moreover, the applications of these models for pricing variance and co-variance swaps will be discussed.