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Edit the Volatility Profile

Edit mode allows you to create a new volatility curve plot for an expiry using a new set of volatility knots. You can use this edited plot to calculate model prices and implied volatilities in TWS, and save your model to use in comparison to Model Navigator-calculated plots.

By default, the Model Navigator’s sophisticated option model calculation engine uses the values in the plot along with the calculated interest rate, dividends, underlying price and other parameters, to calculate the Model price. If you prefer to calculate the model price using the pricing assumptions reflected in an edited plot, you must apply the changes to your plot and leave it in Edit mode. Any expiry that has a volatility curve plot in Edit mode will use this profile in the calculation of the Model price and Implied Volatility.

To edit a volatility curve plot

1. Right-click a volatility curve plot and select Edit.

Edit mode displays a series of brown volatility knots along the bottom of the plot. Grab and move these knots up and down to create a volatility profile that you think more accurately represents the implied volatility data. Applied changes to the plot are reflected in the Manual column of the expiry’s Volatility Curve table.

• To see the values for the manual volatility curve reflected in the Volatility Curve table, be sure that you have selected the expiry whose plot you are editing from the expiry dropdown list at the top of the table.
• The table and plot work in both directions. You can modify the implied volatility of a knot in the plot by changing the corresponding value in the table.
• You can add and delete brown volatility knots in edit mode. To add a knot, point to where you would like to add it and double-click. To delete a knot, select it and double-click.
• Click Refit from the right-click menu to refit the manual volatility knots to the calculated volatility curve.

Compare volatility changes by saving and viewing historical profiles from using the Model History command.

To save a model

1. From the right-click menu, select Save Model.
2. Click Exit Edit to close editing mode.

The model is saved using the current date and time.

To display a model

1. From the right-click menu within a plot, select Model History.
2. Choose the historical model based on the date/time name.
3. Select Show.

The saved model displays as a grey curve inside the real-time colored plot. You can also display saved models under the Expiry in the left Contract Description pane.

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