Financial Engineering Workshop - Valer Zetocha (Julius Bär)

Title
Volatility Shape-Shifters: arbitrage-free transformations of implied volatility surfaces

Abstract
We introduce a framework for generating arbitrage-free transformations of an implied volatility surface based on optimal transport maps between suitable distributions. The approach can be used to solve standard tasks related to volatility surface alterations. Examples include modifying the volatility for quoting purposes, time extrapolation, introduction of a market event, etc. The methodology is not limited to volatility surface transformations but can be useful in a wider area of applications related to synthetic market data generation.

Bio
Valer Zetocha is a senior quantitative analyst at Julius Bär in Zurich. Previous to this role, he worked as an equity derivatives quant for Bear Stearns and JP Morgan and as a senior trader for Banco Santander in Madrid, where he was responsible for the equity stock correlation trading book. His current research interests are in the field of equity derivatives, most specifically in pricing and hedging of correlation derivatives, gap risk pricing and market data modelling. His research articles have been published in Risk Magazine. Valer's educational background lies in theoretical physics. He holds a M.Sc. from Comenius University in Bratislava and a Ph.D. from State University of New York at Stony Brook.

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