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A neural network approach to understanding implied volatility movements

Posted by on 11 June 2019
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“Implied volatility change is negatively correlated with asset prices”, John Hull said, kicking off the presentation of his recent work on volatility surface movements, co-authored by Jay Cao and Jacky Chen.

Understanding volatility surface movements can test whether a stochastic volatility model is consistent with the market; it can help traders adjust prices; and it can help improve delta hedging. In his work, Hull attempts to use machine learning – artificial neural networks, in particular – to improve on previous models.

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