Professional Training
4.9 (17 Reviews)

Volatility: Trading and Managing Risk

London Financial Studies, In London (+3 locations)
3 days
4,860 GBP
Next course start
7 October, 2024 (+4 start dates)
Course delivery
Classroom, Virtual Classroom
3 days
4,860 GBP
Next course start
7 October, 2024 (+4 start dates)
Course delivery
Classroom, Virtual Classroom
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Course description

Volatility: Trading and Managing Risk Course 

This programme gives you a deep understanding of the key differences between volatility models and their implications for trading and risk management.

The course starts by analysing the role of volatility in current financial markets including the causes and impact of volatility smiles on a variety of financial products.  This leads into practical sessions covering techniques for trading volatility, and the application of a range of volatility derivatives such as volatility swaps, volatility futures, and volatility options.

The final part of the programme covers the treatment of volatility in the more popular stochastic volatility models used in the industry such as SABR and Heston and provides insights into the most relevant approaches to modelling volatility under current market conditions.

Upcoming start dates

Choose between 4 start dates

7 October, 2024

  • Classroom
  • London
  • English

7 October, 2024

  • Virtual Classroom
  • Online
  • English

Enquire for more information

  • Classroom
  • New York
  • English

Enquire for more information

  • Classroom
  • Singapore
  • English

Suitability - Who should attend?

This Volatility course is designed for:

  • Derivative traders
  • Quants
  • Fund managers, fund of funds
  • Structured product teams
  • Private wealth managers
  • Risk managers and regulators
  • Finance directors
  • Research analysts
  • Bank and corporate treasury managers

Course requirements: Basic econometrics and Black-Scholes. Participants will also need to be competent users of Excel.

Training Course Content

This Volatility course covers a range of financial risk management issues including:

Day One

Black-Scholes Revisited

  • A quick revision of Black-Scholes and Ito lemma
  • Black-Scholes Greeks
  • Black-Scholes implied volatility and implied risk neutral distributions
  • Examples of derivatives sensitive to the whole volatility surface
  • Motivation for alternatives to Black-Scholes and stochastic volatility  

Local Volatility

  • Is Local Volatility a stochastic volatility model?
  • Calculating a Local Volatility
  • Implementing Local Volatility models
  • Local Volatility as a conditional expectation of instantaneous volatility
  • Weaknesses of Local Volatility models

Workshop: Calibrating local volatility and pricing a Barrier option

Trading on Realised Volatility

  • Volatility Skew and Smile
  • The Greeks
  • Trading Skew and Kurtosis
  • Trading Implied Volatility
  • Variance Swaps and Volatility Swaps

Workshop: Fitting a volatility surface and pricing a variance swap

Day Two

Heston and the Volatility Surface

  • Looking at volatility dynamics in the real world
  • The Heston equation
  • The role of market price of volatility risk
  • Volatility surface sensitivities to Heston parameters
  • Linking Heston parameters to Black-Scholes implied volatilities
  • Implication of the Heston volatility surface dynamics
  • Simulating the Heston process

Workshop: Simulating the Heston dynamics and using it to price a Barrier option

SABR and the Volatility Surface

  • SABR: Stochastic Alpha, Beta and Rho
  • SABR calibration
  • SABR parameters and the volatility surface
  • Sticky strike versus sticky moneyness
  • SABR in interest rate modelling and LMM-SABR

Trading on Volatility Indices

  • Volatility indices – VIX and VSTOXX
  • Volatility as an Asset Class – VXX and VXZ
  • Incorporating Volatility into an Investment Portfolio
  • Futures and Options on Volatility Indices
  • The need for a stochastic volatility model
  • Hedging Volatility Indices

Workshop: Finding a risk neutral distribution of volatility

Day Three

Market Models of Volatility

  • Volatility surfaces revisited – extrapolation and interpolation
  • Combining risk neutral distributions with a copula
  • Using volatility smiles and copulae for pricing basket and spread options
  • Dispersion trading
  • Market models of volatility options
  • Arbitrage between volatility options and S&P options

Workshop: Relating VIX options and variance swaps

Hedging Volatility Exposure

  • Hedging volatility exposure of a book of exotic options
  • Static versus Dynamic Hedging
  • Impact of Model choice
  • Smile risk
  • Understanding greeks
  • Vega convexity

Workshop: Finding the best vega hedge

Course delivery details

Courses are delivered in the London classroom and live online via LFS Live in London, New York, and Singapore time zones.

Please contact LFS for more details.

Why choose London Financial Studies

Established 1997

Training delivered to 14,300 professionals from almost 2,000 companies

97% recommendation rate 

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Average rating 4.9

Based on 17 reviews.
Reviews are published according to our review policy.
Write a review!
First Vice President - Wealth Management
22 Apr 2019

The course was beyond the needs of and my objectives given my current role in wealth management. […] What I found most exceptional about Simon (teacher) was his ability to pre...

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Senior Quantitative Analyst
18 Apr 2019
Insightful Practical Training

Dr. Simon Acomb's delivery was a rigorous but very insightful practical training tailored for Quants on volatility modelling. It emphasizes the features of each model as well as...

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30 Apr 2017
Great Course, Highly Recommended.

Great course, highly recommended.

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