Principal Component Analysis For Implied Volatility Surfaces

Seminar / Lecture
Open to the Public

You are cordially invited to attend the upcoming FRE Lecture on Thursday, April 4th at 6PM in the Event MakerSpace - Rogers Hall, 1st Floor. Dr. Andrew Papanicolaou will present a talk on the following topic:


Principal Component Analysis For Implied Volatility Surfaces


The surfaces of implied volatilities are available on WRDS for a few thousand US equities. We take a principal component approach in tensor dimensions, and find a suitable way to analyze residuals from low-rank estimates of the whole option space. We show that the first such principal component is close to the beta of an option position with an open-interest-weighted market portfolio, similar to the market factor in the CAPM for equities.


Andrew Papanicolaou has been a professor at NYU Tandon since 2015. His PhD is in applied mathematics from Brown University, and he has been a lecturer at the ORFE Department at Princeton University and in the School of Mathematics & Statistics at the University of Sydney. He holds a MS in Financial Mathematics from the University of Southern California and BS in Mathematical Sciences from the University of California at Santa Barbara.

We look forward to having you join us next Thursday for the talk and refreshments. See attached poster for more details. Please mark your calendars.