{"product_id":"volatility-9781119501619","title":"Volatility","description":"\u003cb\u003eBook Synopsis\u003c\/b\u003e\u003cbr\u003e\u003cbr\u003e\u003cbr\u003e\u003cb\u003eTable of Contents\u003c\/b\u003e\u003cbr\u003e\u003cp\u003ePreface xiii\u003c\/p\u003e \u003cp\u003eAcknowledgments xv\u003c\/p\u003e \u003cp\u003eAbout the Author xvii\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 1 Volatility and Options 1\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e1.1 What Is an Option? 1\u003c\/p\u003e \u003cp\u003e1.2 Options Are Bets on Volatility 3\u003c\/p\u003e \u003cp\u003e1.3 Option Premiums and Breakevens 6\u003c\/p\u003e \u003cp\u003e1.3.1 Understanding Option Premiums 6\u003c\/p\u003e \u003cp\u003e1.3.2 Relation Between Premium and Breakeven 7\u003c\/p\u003e \u003cp\u003e1.4 Strike Conventions 9\u003c\/p\u003e \u003cp\u003e1.5 What Is Volatility? 10\u003c\/p\u003e \u003cp\u003e1.5.1 Implied Volatility, σ\u003csub\u003eimplied\u003c\/sub\u003e 11\u003c\/p\u003e \u003cp\u003e1.5.2 Probabilities and Breakevens 15\u003c\/p\u003e \u003cp\u003e1.5.3 Implied Volatility and Realized Volatility 15\u003c\/p\u003e \u003cp\u003e1.5.4 Realized Volatility, \u003csup\u003eσ\u003c\/sup\u003erealized 16\u003c\/p\u003e \u003cp\u003e1.6 Trader's Summary 19\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 2 Understanding Options Without a Model 21\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e2.1 Vanilla Options 21\u003c\/p\u003e \u003cp\u003e2.1.1 Option Payoffs 22\u003c\/p\u003e \u003cp\u003e2.2 Making Assumptions 23\u003c\/p\u003e \u003cp\u003e2.3 Understanding V\u003csub\u003et\u003c\/sub\u003e with Economic Assumptions 24\u003c\/p\u003e \u003cp\u003e2.4 Delta and Delta Hedging 25\u003c\/p\u003e \u003cp\u003e2.5 The Value Function 26\u003c\/p\u003e \u003cp\u003e2.6 Defining Delta 27\u003c\/p\u003e \u003cp\u003e2.7 Understanding Delta 30\u003c\/p\u003e \u003cp\u003e2.8 Delta as the Probability of an In-the-Money Expiry 32\u003c\/p\u003e \u003cp\u003e2.9 Applying Delta as the Probability of an ITM Expiry in Practical Trading 37\u003c\/p\u003e \u003cp\u003e2.10 Constructing V\u003csub\u003et\u003c\/sub\u003e 38\u003c\/p\u003e \u003cp\u003e2.10.1 Jensen's Inequality: V\u003csub\u003et\u003c\/sub\u003e = V(S\u003csub\u003et\u003c\/sub\u003e, t, σ\u003csub\u003ei\u003c\/sub\u003e) ≥ max(S\u003csub\u003et\u003c\/sub\u003e − K, 0) 40\u003c\/p\u003e \u003cp\u003e2.10.2 Trading Intuition Behind Jensen's Inequality 40\u003c\/p\u003e \u003cp\u003e2.10.3 American Options 41\u003c\/p\u003e \u003cp\u003e2.10.4 Gradient of V\u003csub\u003et\u003c\/sub\u003e 42\u003c\/p\u003e \u003cp\u003e2.10.5 Drawing V\u003csub\u003et\u003c\/sub\u003e 42\u003c\/p\u003e \u003cp\u003e2.11 Option Deltas 44\u003c\/p\u003e \u003cp\u003e2.12 A Note on Forwards 45\u003c\/p\u003e \u003cp\u003e2.13 Put–Call Parity 46\u003c\/p\u003e \u003cp\u003e2.14 Trader's Summary 48\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 3 The Basic Greeks: Theta 49\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e3.1 Theta, ;; 50\u003c\/p\u003e \u003cp\u003e3.1.1 Overnight Theta for an ATM Option 51\u003c\/p\u003e \u003cp\u003e3.1.2 Dependence of ;;(S\u003csub\u003et\u003c\/sub\u003e, t, σ\u003csub\u003ei\u003c\/sub\u003e) on S\u003csub\u003e\u003csup\u003et\u003c\/sup\u003e\u003c\/sub\u003e 52\u003c\/p\u003e \u003cp\u003e3.1.3 Dependence of ;;(S\u003csub\u003et\u003c\/sub\u003e, t, σ\u003csub\u003ei\u003c\/sub\u003e) on t 60\u003c\/p\u003e \u003cp\u003e3.2 Trader's Summary 65\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 4 The Basic Greeks: Gamma 67\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e4.1 Gamma, ;; 68\u003c\/p\u003e \u003cp\u003e4.2 Gamma and Time Decay 70\u003c\/p\u003e \u003cp\u003e4.3 Traders' Gamma, ;;\u003csub\u003etrader\u003c\/sub\u003e 70\u003c\/p\u003e \u003cp\u003e4.4 Gamma–Time Decay Trade-offs in More Detail 71\u003c\/p\u003e \u003cp\u003e4.5 PnL Explain 73\u003c\/p\u003e \u003cp\u003e4.5.1 Example: Gamma, Time Decay, and PnL Explain for a 1-Week Option 73\u003c\/p\u003e \u003cp\u003e4.6 Delta Hedging and PnL Variance 76\u003c\/p\u003e \u003cp\u003e4.7 Transaction Costs 78\u003c\/p\u003e \u003cp\u003e4.8 Daily PnL Explain 79\u003c\/p\u003e \u003cp\u003e4.9 The Gamma Profile 81\u003c\/p\u003e \u003cp\u003e4.9.1 Gamma and Spot 81\u003c\/p\u003e \u003cp\u003e4.9.2 Gamma and Implied Volatility 82\u003c\/p\u003e \u003cp\u003e4.9.3 Gamma and Time 83\u003c\/p\u003e \u003cp\u003e4.9.4 Total Gamma 84\u003c\/p\u003e \u003cp\u003e4.10 Trader's Summary 84\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 5 The Basic Greeks: Vega 87\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e5.1 Vega 88\u003c\/p\u003e \u003cp\u003e5.2 Understanding Vega via the PDF 89\u003c\/p\u003e \u003cp\u003e5.3 Understanding Vega via Gamma Trading 89\u003c\/p\u003e \u003cp\u003e5.4 Vega of an ATMS Option Across Tenors 90\u003c\/p\u003e \u003cp\u003e5.5 Vega and Spot 91\u003c\/p\u003e \u003cp\u003e5.6 Dependence of Vega on Implied Volatility 94\u003c\/p\u003e \u003cp\u003e5.7 Vega Profiles Applied in Practical Options Trading 95\u003c\/p\u003e \u003cp\u003e5.8 Vega and PnL Explain 96\u003c\/p\u003e \u003cp\u003e5.9 Trader's Summary 97\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 6 Implied Volatility and Term Structure 99\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e6.1 Implied Volatility, \u003csup\u003eσ\u003c\/sup\u003e\u003ci\u003eimplied\u003c\/i\u003e 100\u003c\/p\u003e \u003cp\u003e6.2 Term Structure 104\u003c\/p\u003e \u003cp\u003e6.3 Flat Vega and Weighted Vega Greeks 104\u003c\/p\u003e \u003cp\u003e6.3.1 Flat Vega 105\u003c\/p\u003e \u003cp\u003e6.3.2 Weighted Vega 106\u003c\/p\u003e \u003cp\u003e6.3.3 Beta-Weighted Vega 108\u003c\/p\u003e \u003cp\u003e6.4 Forward Volatility, Forward Variance, and Term Volatility 108\u003c\/p\u003e \u003cp\u003e6.4.1 Calculating Implied Forward Volatility 110\u003c\/p\u003e \u003cp\u003e6.5 Building a Term Structure Model Using Daily Forward Volatility 111\u003c\/p\u003e \u003cp\u003e6.6 Setting Base Volatility Using a Three-Parameter GARCH Model 114\u003c\/p\u003e \u003cp\u003e6.6.1 Applying the Three-Parameter Model 116\u003c\/p\u003e \u003cp\u003e6.6.2 Limitations of GARCH 117\u003c\/p\u003e \u003cp\u003e6.6.3 Risk Management Using the Three-Parameter Model 118\u003c\/p\u003e \u003cp\u003e6.6.4 Empirical GARCH Estimation 118\u003c\/p\u003e \u003cp\u003e6.7 Volatility Carry and Forward Volatility Agreements 119\u003c\/p\u003e \u003cp\u003e6.7.1 Volatility Carry in the GARCH Model 120\u003c\/p\u003e \u003cp\u003e6.7.2 Common Pitfalls in Volatility Carry Trading 121\u003c\/p\u003e \u003cp\u003e6.8 Trader's Summary 121\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 7 Vanna, Risk Reversal, and Skewness 123\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e7.1 Risk Reversal 125\u003c\/p\u003e \u003cp\u003e7.2 Skewness 127\u003c\/p\u003e \u003cp\u003e7.3 Delta Space 129\u003c\/p\u003e \u003cp\u003e7.4 Smile in Delta Space 130\u003c\/p\u003e \u003cp\u003e7.5 Smile Vega 132\u003c\/p\u003e \u003cp\u003e7.5.1 Smile Vega Notionals 134\u003c\/p\u003e \u003cp\u003e7.6 Smile Delta 135\u003c\/p\u003e \u003cp\u003e7.6.1 Considerations Relating to Smile Delta 136\u003c\/p\u003e \u003cp\u003e7.7 Trader's Summary 137\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 8 Volgamma, Butterfly, and Kurtosis 139\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e8.1 The Butterfly Strategy 140\u003c\/p\u003e \u003cp\u003e8.2 Volgamma and Butterfly 141\u003c\/p\u003e \u003cp\u003e8.3 Kurtosis 142\u003c\/p\u003e \u003cp\u003e8.4 Smile 143\u003c\/p\u003e \u003cp\u003e8.5 Butterflies and Smile Vega 144\u003c\/p\u003e \u003cp\u003e8.6 Trader's Summary 145\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 9 Black-Scholes-Merton Model 147\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e9.1 The Log-normal Diffusion Model 148\u003c\/p\u003e \u003cp\u003e9.2 The BSM Partial Differential Equation (PDE) 148\u003c\/p\u003e \u003cp\u003e9.3 Feynman-Kac 152\u003c\/p\u003e \u003cp\u003e9.4 Risk-Neutral Probabilities 153\u003c\/p\u003e \u003cp\u003e9.5 Probability of Exceeding the Breakeven in the BSM Model 154\u003c\/p\u003e \u003cp\u003e9.6 Trader's Summary 155\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 10 The Black-Scholes Greeks 157\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e10.1 Spot Delta, Dual Delta, and Forward Delta 157\u003c\/p\u003e \u003cp\u003e10.1.1 Spot Delta 157\u003c\/p\u003e \u003cp\u003e10.1.2 The ATM Strike and the Delta-Neutral Straddle 159\u003c\/p\u003e \u003cp\u003e10.1.3 Dual Delta 160\u003c\/p\u003e \u003cp\u003e10.1.4 Forward Delta 161\u003c\/p\u003e \u003cp\u003e10.2 Theta 161\u003c\/p\u003e \u003cp\u003e10.3 Gamma 163\u003c\/p\u003e \u003cp\u003e10.4 Vega 164\u003c\/p\u003e \u003cp\u003e10.5 Vanna 164\u003c\/p\u003e \u003cp\u003e10.6 Volgamma 165\u003c\/p\u003e \u003cp\u003e10.7 Trader's Summary 165\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 11 Predictability and Mean Reversion 167\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e11.1 The Past and the Future 167\u003c\/p\u003e \u003cp\u003e11.2 Empirical Analysis 168\u003c\/p\u003e \u003cp\u003e\u003cb\u003eAPPENDIX A Probability 173\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eA.1 Probability Density Functions (PDFs) 173\u003c\/p\u003e \u003cp\u003eA.1.1 Discrete Random Variables and PMFs 173\u003c\/p\u003e \u003cp\u003eA.1.2 Continuous Random Variables and PDFs 174\u003c\/p\u003e \u003cp\u003eA.1.3 Normal and Log-normal Distributions 176\u003c\/p\u003e \u003cp\u003e\u003cb\u003eAPPENDIX B Calculus 179\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eGlossary 181\u003c\/p\u003e \u003cp\u003eReferences 183\u003c\/p\u003e \u003cp\u003eIndex 185\u003c\/p\u003e","brand":"John Wiley \u0026 Sons Inc","offers":[{"title":"Default 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