More Reference Material

Definitions

Standard Deviation Defined: 

Black-Scholes Options Pricing Model: 

Black Options Pricing Model: 

Variance swap: 

Volatility Swap: 

Heston Model: 

Books (Synopses from the publishers)

Volatility Master Class for Quants (Wiley Finance) — Bruno Dupire

Volatility presents a fascinating insight into a key area of modern finance, authored by one of its original pioneers. Building on twenty years of extensive practice and theory, the book presents models and ideas from financial engineering for those who trade themselves or create models for traders.

Volatility Trading, + Website — Euan Sinclair

Popular guide to options pricing and position sizing for quant traders In this second edition of this bestselling book, Sinclair offers a quantitative model for measuring volatility in order to gain an edge in everyday option trading endeavors. With an accessible, straightforward approach, he guides traders through the basics of option pricing, volatility measurement, hedging, money management, and trade evaluation. This new edition includes new chapters on the dynamics of realized and implied volatilities, trading the variance premium and using options to trade special situations in equity markets. Filled with volatility models including brand new option trades for quant traders Options trader Euan Sinclair specializes in the design and implementation of quantitative trading strategies Volatility Trading, Second Edition + Website outlines strategies for defining a true edge in the market using options to trade volatility profitably.

Volatility and Time Series Econometrics: Essays in Honor of Robert Engle — Edited by Tim Bollerslev, Jeffrey Russell, Mark Watson

Robert Engle received the Nobel Prize for Economics in 2003 for his work in time series econometrics. This book contains 16 original research contributions by some the leading academic researchers in the fields of time series econometrics, forecasting, volatility modelling, financial econometrics and urban economics, along with historical perspectives related to field of time series econometrics more generally.

Volatility and Time Series Econometrics: Essays in Honor of Robert Engle — Edited by Tim Bollerslev, Jeffrey Russell, Mark Watson

This publication aims to fill the void between books providing an introduction to derivatives, and advanced books whose target audience are members of quantitative modelling community.

In order to appeal to the widest audience, this publication tries to assume the least amount of prior knowledge. The content quickly moves onto more advanced subjects in order to concentrate on more practical and advanced topics. 

Option Volatility and Pricing: Advanced Trading Strategies and Techniques — Sheldon Natenberg

The bestselling Option Volatility & Pricing has made Sheldon Natenberg a widely recognized authority in the option industry. At firms around the world, the text is often the first book that new professional traders are given to learn the trading strategies and risk management techniques required for success in option markets.

Black–Scholes and Beyond: Option Pricing Models — Neil A. Chriss

Nigel Goldenfeld, a professor of physics at University of Illinois, recommends Chriss's book Black–Scholes and Beyond to those of his students "contemplating a career in quantitative finance", as giving an "Excellent overview of modern day finance, financial models, and their shortcomings. A great blend of practical and theoretical knowledge, clearly presented"

Volatility as an Asset Class — Israel Nelken

Written from the practitioner's perspective, but with important academic contributions, this book is wholly devoted to the trading of volatility as an asset class. This new guide covers: Trading of volatility and related issues (eg, measurement, forecasting, modelling and hedging); 3rd generation volatility products including volatility, variance, gamma and correlation swaps; Unique aspects of these non-physical contracts; A review of the market; Trade ideas; The connection between stock, volatility and credit; How the models are calibrated to the market.

Courses

Volatility: Trading and Managing Risk. London Financial Studies. (Disclaimer: This link is for information only. VolX is not affiliated with LondonFS and specifically does not endorse this course.):

Volatility: The Options Industry Council. (Disclaimer: This link is for information only. VolX is not affiliated with OIC and specifically does not endorse this course.):

Research Papers

The Volatility Laboratory (VLab) (GARCH-based volatility forecasts and correlations):

The Rise and Rise of Volatility Trading, Sponsored Advertorial, FOW, September 2008:

Several papers from Nikunj Kapadia and the Isenberg School of Management:

Peter Carr’s Research:

Roger Lee, Assistant Professor, Department of Mathematics, University of Chicago:

Liuren Wu's Publications:

Fuertes, A., Izzeldin, M., Kalotychou, E. (2009) On forecasting daily stock volatility: The role of intraday information and market conditions. International Journal of Forecasting, 25, 259–281:

Also see the Volatility Library.

Articles

Why VIX doesn’t work, by Howard Simons:

A Glitch in the VIX:

VIX ETN: Ineffective as Both Short-Term, Long-Term Play:  the author: Bill Luby:

Understanding VIX futures and options:

Lack of liquidity means a comeback for vol swaps,  author: Matt Cameron:

Web Sites

The Volatility Institute:

Center for International Securities and Derivatives Markets (CISDM):

Center for Financial Studies:

Hoadley Trading & Investment Tools: AND

QMS Advisors: Measuring Volatility, Derivatives-based Portfolio Solutions: