# Volatility Predictions

Black-Scholes model, the mathematical equation used for pricing options is widely used among dolphin.fm volatility products. The volatility parameter σ in the option pricing formula is the core parameter in the dolphin.fm quotation and hedging system. The capability of accurate realized volatility prediction plays a key role on whether the market maker's risk can be completely hedged or even profitable.

dolphin.fm’s RV prediction model:

The estimation of price of underlying asset between time [0,T]:

dolphin.fm will implement the following four volatility time series prediction models, and dynamically adjust the selection of models according to the back testing result, or weighted to obtain the final volatility prediction:

GARCH Model

Stochastic Volatility Model

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