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Volatility Surfaces -Theory, Rules of Thumb, and Empirical Evidence
John Hull / Toby Daglish / Wulin Suo
S&P 500 options / derivatives marketsResource overview

Volatility Surfaces -Theory, Rules of Thumb, and Empirical Evidence

Paper2006

by John Hull, Toby Daglish, Wulin Suo

Tags
S&P 500 optionsderivatives marketsempirical asset pricingfactor modelsimplied volatilityno-arbitrage conditionsoptions pricingterm structure of volatilitytrader heuristicsvolatility skewvolatility smilevolatility surface

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Understand this paper

Suggested foundations for volatility models and surfaces and asset pricing and factor research. Specialist prerequisites vary by paper.

Before you read

  1. Stochastic Processes, Brownian Motion and Itô's Lemma

    Follow diffusion-based models and their assumptions.

  2. ARCH and GARCH

    Separate conditional volatility from observed returns.

  3. Linear Regression

    Interpret exposures, residuals and uncertainty in fitted coefficients.

  4. Financial Return Characteristics

    Work with returns and recognise their empirical limitations.

Go further

  1. Stochastic Volatility and the Heston Model

    Study a correlated stochastic-variance model.

  2. Reading the Implied Vol Surface — Moneyness, Term Structure, and Quoting Conventions

    Interpret prices across strikes and expiries.

  3. Factor construction

    Connect factor definitions to portfolio construction.

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Lesson links open public previews. Access to full lessons depends on the topic and your membership.

Explore Advanced Derivatives and Exotic Options Explore Empirical Asset Pricing and Factor Investing

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