IDEAS home Printed from https://ideas.repec.org/a/kap/revdev/v28y2025i3d10.1007_s11147-025-09214-7.html
   My bibliography  Save this article

Swing option-implied volatility

Author

Listed:
  • Hendrik Kohrs

    (VNG Handel & Vertrieb GmbH)

  • Hermann Mühlichen

    (VNG Handel & Vertrieb GmbH)

  • Benjamin R. Auer

    (Friedrich Schiller University Jena
    University of Leipzig
    CESifo Munich)

Abstract

Motivated by the increasing interest of academics and practitioners in swing options, we develop a method for computing swing option-implied volatility. In a dynamic programming option pricing framework supplemented by an additive single-factor forward curve model, we propose to obtain implied volatility via a combination of Monte Carlo techniques and a root-finding algorithm. In addition to deriving the convergence properties of our approach, we apply it in an empirical study of volatilities implied by natural gas swing options. Here, we investigate their key features (related to seasonality and moneyness) and highlight their industry merits in delta hedging applications.

Suggested Citation

  • Hendrik Kohrs & Hermann Mühlichen & Benjamin R. Auer, 2025. "Swing option-implied volatility," Review of Derivatives Research, Springer, vol. 28(3), pages 1-44, October.
    • Handle: RePEc:kap:revdev:v:28:y:2025:i:3:d:10.1007_s11147-025-09214-7
    DOI: 10.1007/s11147-025-09214-7
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11147-025-09214-7
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11147-025-09214-7?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:revdev:v:28:y:2025:i:3:d:10.1007_s11147-025-09214-7. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.