Hail Mary for volatility surface derivation from 30DTE IV value

S

stepandfetchit

I am working on derivation of the Implied Volatility surface from the 30DTE IV. For example, for SPX, this would be from the VIX. Curious if anyone else has marched down this path before and desire to share info.
I am making good progress, but progress is slow. Initially, considering only SPX, RUT, SPY, and IWM, since ample data is available and less noisy than other instruments.
The DTE axis solution was fairly easy. The moneyness axis has some variances that are still being worked. So if you have experience in this, I would like to compare notes.
 
2rosy:
No! For example, have you (or anyone out there) derived/approximated the IV Surface for SPX options, when the only option related data available is the VIX? The VIX value will be a point on that surface. (for SPX and RUT, that point is near the PUT strike with a Delta of about -0.32)
 
are you looking for a relative value of the otm to atm options on a surface? i've done surfaces relative to delta and strike in R programming ..
 
stepandfetchit said:
2rosy:
No! For example, have you (or anyone out there) derived/approximated the IV Surface for SPX options, when the only option related data available is the VIX?
More...

This makes no sense. How can you 'derive' a 3-d surface (or even 2-d smile) from a single data point?
 
The VIX value is a discrete approximation of integrating the implied risk-neutral distribution. It incorporates the entire option chain. It is not a point on the surface.

What are you trying to do?
 
stepandfetchit said:
I am working on derivation of the Implied Volatility surface from the 30DTE IV. For example, for SPX, this would be from the VIX. Curious if anyone else has marched down this path before and desire to share info.
I am making good progress, but progress is slow. Initially, considering only SPX, RUT, SPY, and IWM, since ample data is available and less noisy than other instruments.
The DTE axis solution was fairly easy. The moneyness axis has some variances that are still being worked. So if you have experience in this, I would like to compare notes.
More...
Please clarify your intentions
 
cdcaveman: Not quite! I am pealing this puzzle one layer at a time. I have the OTM PUTs fairly well nailed so far, and have a simple algorithm to extend it to cover the ITM PUTs, but am less pleased with the reliability of this portion across time-frames and instruments.
debitspread: Index instruments such as SPX and RUT will have an Implied Volatility surface with close pattern similarity to the following picture: -- The un-marked axis is IV for OTM options.
upload_2015-8-5_15-23-11.png


longthewings: If I told you, I'd need to hire Vinney's to do a job for me! ;-)
It is a long story, and would bore you. Short answer: Filter out noise in Daily Option prices to facilitate rapid automated backtesting of option strategies, using available free historic data. yada yada yada ...
samuel11: I have been using that paper which was instrumental in this effort. -- A very good & well written work.

All: I prefaced the thread with "Hail Mary", presuming no one here has done this, which I expect to be the case, as this is not mainstream by any stretch.
 
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