Forecasting Volatilites, Correlations and Risk Factor Dynamics by Using Derivative Prices: A Forward-looking Approach Based on Market´s Mood

Gustavo Athayde

Derivative prices offer us more than simple numbers. They have implied forward-looking probability distributions for different maturities that change according to market´s humor. In this course I will show how to estimate the paraameters of these univariate distributions, and even corresponding joint distributions. For the case of interest rates, it will be presented a proper way to obtain the risk factors of the term structure of interest rates, and their future dynamics implied in their options markets.