Implied vs realised · Term structure · Skew analysisOptions markets systematically overprice implied volatility relative to subsequent realised volatility — the volatility risk premium. Our systems measure this premium across the universe of optionable equities and identify the opportunities with the highest expected signal quality. The challenge is that the premium is not constant: it varies across names, across time, and across the volatility surface.
Traditional volatility models rely exclusively on price and options data. We augment these with alternative data signals: the complexity of corporate communications, the frequency of material updates, and the linguistic divergence between consecutive reporting periods. Companies with rapidly changing language tend to exhibit higher subsequent realised volatility — a signal that is orthogonal to price-based vol estimates.
The volatility surface — across strikes and expirations — contains information about market expectations of future distribution shapes. We identify mispricings in the term structure (calendar spreads) and the skew (risk reversals) when our fundamental signals disagree with the options market's implied expectations. Each analytical framework is bounded to limit exposure from any single volatility signal.