Volatility Surfaces inputVolatilityType

paul.mcallister1
paul.mcallister1 LSEG
in Eikon Data APIs

Could someone please explain the difference between Implied and Quoted for inputVolatilityType on the surfaces API endpoint:

https://api.edp.thomsonreuters.com/data/quantitative-analytics-curves-and-surfaces/v1/surfaces


From API documentation page:

inputVolatilityTypeenumThe enumerate specifies the type of volatility used to build the surface.

  • Quoted
  • Implied
  • Settle (deprecated)


From an older PDF (outdated)

inputVolatilityType Enumerate This enumerate specify if the generation of the volatility is done from the implied volatility calculated from the latest quote or from the settlement volatility from the previous close. The available values are: Implied, Settle.


Is it correct to assume that:

Implied - calculated from previous close (same as "Settle")

Quoted - calculated from latest quote (used to be "implied")?


Also, trying to relate these options to the Equity Volatility Surface Eikon app, are the Volatilty Type options there analagous to the API options?

Settlement IV (eikon) -> Implied (API)?

Mid IV (eikon) -> Quoted (API)?

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Best Answer

  • Gurpreet
    Gurpreet admin
    Answer ✓

    Hello @paul.mcallister1

    We are only able to answer technical API question on these forums. Here is an article on Instrument Pricing Analysis. If this information is not sufficient, I would recommend that you open a content support ticket at myRefinitiv.

Answers

  • Maciej.Jasinski
    Maciej.Jasinski LSEG

    Quoted - uses ready solution of analytics calculated IVs distributed directly to option FIDs, quicker and recommended if this solution is already exploited

    Implied - calculated on the fly by our QPS, slower but may remove any model compatibility concerns raised by the above

  • Maciej.Jasinski
    Maciej.Jasinski LSEG

    The difference between “Quoted” and “Implied” is that “Implied” will compute implied volatilities on the fly, while “Quoted” will use volatility data that is already available as part of Refinitiv data.
     
    What it means for our API users:

    • Surfaces with inputVolatilityType = “quoted” will be quicker to return results, and might be an interesting choice if they are already using Refinitiv volatilities.
    • Surfaces with inputVolatilityType = “implied” can cover use cases where the volatility is not available or when an exchange only contributes a settlement price and not volatilities.


    Both modes support Mid realtime calculations, settlement calculations and End of day close calculations.

    Currently the default is "implied" and this input is exploited in SURF app.

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