Volatility of volatility of financial markets |
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| Institution: | 1. DRW Investments LLC, Chicago Mercantile Exchange Center 30 S. Wacker Dr., Ste 1516, Chicago, IL 60606, U.S.A.;2. Lester Ingber Research P.O. Box 06440, Wacker Dr. PO — Sears Tower, Chicago, IL 60606-0440, U.S.A. |
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| Abstract: | We present empirical evidence for considering volatility of Eurodollar futures as a stochastic process, requiring a generalization of the standard Black-Scholes (BS) model which treats volatility as a constant. We use a previous development of a statistical mechanics of financial markets (SMFM) to model these issues. |
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