implied correlation

[johntsai90]

i have came across with this term, does any one know what's implication of implied correlation? what kind of strategies could we been used based on that figure.

thanks

 

[MTE]

It's used in the context of a dispersion trade. Use the search here on ET and Google.

 

[matador04]

http://www.nuclearphynance.com/User Files/2/Dispersion - A Guide for the Clueless - Version 1.pdf

 

[Martinghoul]

Implied correlation is also periodically used in rates contexts. Not so much in the vanilla world, but more for various CMS options.

 

[phattails]

Implied volatility is a better input in correlation calculation.

 

[johntsai90]

Does anyone use this implied correlation to formulate any pair trading strategy?

 

[MasterAtWork]

http://icf.som.yale.edu/pdf/seminars04-05/Maenhout.pdf