Peter Carr Unfolded the Mystery of Options Market Volatility at SAIF Distinguished Speaker Series


As the guest speaker of SAIF-CAFR Distinguished Speaker Series on July 23rd, 2018, Prof. Peter Carr (Head of the Department of Finance and Risk Engineering at the School of Engineering of New York University), focused on the options market and analyzed the relationship between volatility trading, skew trading, and smile trading. Prof. David Li, Deputy Director of China Academy of Financial Research (CAFR) and Professor at Shanghai Advanced Institute of Finance (SAIF) at Shanghai Jiao Tong University (SJTU), hosted the interactive discussion session.

Prof. Carr is highly recognized and respected by both students and practitioners of financial metrology. As one of Wall Street's most authoritative experts in quantitative investment, he worked for several of the world's leading institutions (including Morgan Stanley and Bloomberg Quant Research) and he was selected as one of the “Top 50 Fin-Tech Influencers”. Moreover, he has more than 85 publications in academic and industry journals and serves as an associate editor of several journals related to mathematics finance, boasting extensive experience in both industry and academia.

During the event, Prof. Carr explained the definitions of volatility trading, skew trading, and smile trading to the audience, and analyzed the right timing of these trading opportunities. When the expectation of random mean is different from the observed implied volatility, it means an opportunity for volatility trading. When the non-zero slope is different than expected, there is a chance of skew trading. And when the convex number is different from the actual volatility in the future, it implies an opportunity for smile trading.