Trading Vol in an IB - what are the good resources for Rates, Credit, FX, Equities? Market-makers' help greatly appreciated
Hi guys, I'm a junior market maker at a US bank working on a desk close to the vol desk in my asset class. I am very passionate about the Vol side and I have created this thread hoping that it will become a primer about the different resources people should use to learn about vol in different asset classes.
Therefore, I invite people here (especially current/former IB vol traders) to share their experiences about what resources (books, articles, banks' primers, etc.) people could use to learn about vol from a market maker's perspective.
From my knowledge so far:
General Vol: Options, Futures & Other Derivatives - Hull Volatility Trading - S. Natenberg Volatility Trading - E Sinclair Dynamic Hedging - Taleb (in the process of reading)
Equity Vol: All you need to know about Variance Swaps - piece by JPMorgan, found online
Rates Vol http://www.math.ku.dk/~rolf/SABR.pdf
Credit Vol ?
FX Vol FX Options and Structured Products - Uwe Wystup Any other pieces by Uwe Wystup
Commodities Vol ?
Thank you very much for your help guys! I hope this thread will be useful for everyone!
For rates vol, here's the seminal paper by Pat Hagan: http://www.math.ku.dk/~rolf/SABR.pdf
Thanks a lot, will add to the collection above and will definitely read it these days!
Also, for FX vol, pretty much anything by Uwe Wystup is sorta required reading... For instance, his book "FX Options and Structured Products".
You have read a lot of books!!!
Would really appreciate if you have the time to create a post on required reading for different products. :)
Added Uwe Wystup's book to the collection. Thank you!
Bump this up!
Anything for Credit vol?
...
On the same note as the "Everything You Need To Know" piece, http://www.emanuelderman.com/media/gs-volatility_swaps.pdf
Rates vol: All the general vol books you mentioned are quite good (esp dynamic hedging). More specifically, I'd try to pick out the relevant chapters of Brigo and Mercurio's book (it's a heavy read, so it will take some time). Don't skip the short-rate models (HW, etc). Also, Hagan's initial SABR paper is great - SABR (or various morphed prop versions of the initial model) are still quite popular on the street, I hear.
Overall, there's not a lot of difference b/w say FX/Equity vol and rates vol in terms of managing risk, apart from the added complications of the underlying becoming non-linear (in a swaption for instance) and added dimensional . Once you understand general vol trading ideas (like the greeks), thinking about how things change if you replace the underlying equity index with a swap would be useful (ie - how does duration effect the greeks, how does PCP change with a non-linear underlying, etc).
Another things I would bear in mind if actually joining a rates vol desk is getting used to the jargon. Thinking of puts and calls as payers and receivers, for instance, adds a couple of extra seconds to your reasoning and just slows you down initially.
Thanks a lot for the advice!
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