letting go of the past (maybe?)

[Overnight]

You are right, in your case you were likely estimating the parameterizations but it is akin to an estimation of expected implied volatilities.

The density can be useful but in my opinion for your use case not in the way you derived it. Look at the larger picture, you are essentially using market IVs to derive the density of an underlying continuous random variable that is also market driven. What edge are you expecting to derive from that? That's why I mentioned that such approach is often times used in market making of otc options, hence likely of little value to you. What you want is the density that is derived from non-traded metrics. That can then be used as foundation for a model that outputs the deviation from traded levels and at which you then decide to buy or sell volatility.

Density derived from non-traded metrics. Interesting.

 

[M.W.]

what else, unless you look to price strikes and tenors which are illiquid. Your own model should be derived from metrics other than traded prices else you end up predicting the same that you used to derive your model.

Density derived from non-traded metrics. Interesting.

 

[Baozi]

Gentlemen, thanks a lot for your contribution. Now I can finally pull the plug on this chapter and move on.

 

[earth_imperator]

Gentlemen, thanks a lot for your contribution. Now I can finally pull the plug on this chapter and move on.

Book it under "Wasted Times & Experiences"

 

[Aquarians]

It's incredibly arrogant (and very human at the same time) to assume you start in a domain suffocated by competition like perhaps noone else and the first idea you get as a clueless newbie is going to be the jackpot.

It's arrogant and stupid because it never works. It's human because can't be otherwise, if you wouldn't foolishly believe in your inexistent prowess you wouldn't even embark on the perilous 10,000 miles journey to find the holy grail of trading.

After 20 years of experience in the domain I can tell you that even after you get to EXPECT the unexpected, what you eventually find that actually works still surprises you. And no, it's not the original idea you start with, far from it.