Financial Market Volatility

What it is about

You learn how volatility of financial markets is modeled, estimated and forecasted – both under the physical and under the risk-neutral measure. The course covers discrete procedures (e.g. GARCH, moving averages, Realized Volatility), stochastic models in continuous time (e.g. Heston, local volatility) and practical applications such as hedging, risk assessment, portfolio allocation and trading of volatility products (Variance Swaps, VIX futures, ETFs/ETNs). At the end you can calibrate models, make forecasts and implement the methods in software such as Matlab.

What you will be able to do

• Know essential statistical models for modeling market volatility
• Understand the concept of implicit and local volatility
• Calibrate models under physical and risk-neutral measure
• Apply models for hedging, risk assessment and portfolio allocation
• Value and trade exchange-traded volatility products
• Implement methods in programming environments like Matlab

What the module consists of

• VorlesungDelivery of content with a focus on application to real financial data
• Übung/Exercise Sessioncomputer-oriented exercises for deepening and practical implementation

Teaching method

• Vorlesungsfolien/Slide presentationsfor structured presentation of content and practical examples
• Whiteboardfor explaining concepts and derivations
• Übungsblätter und Programmieraufgabento practice practical implementation and application