“’Forecasting volatility around earnings has always been tricky,’ says Garrett DeSimone, head of quantitative research at options data firm OptionMetrics. ‘Earnings are known to cause jumps in stock prices, which can alter the volatility surface dramatically… [both] the level of volatility [and] the shape of the volatility smile.’

Retail traders can drive up the volatility of popular stocks ahead of earnings, exacerbating the post-earnings stock response, DeSimone adds.”

Risk.net’s recent article, “Citi quants’ AI model aims to hedge earnings surprises,” features insight on earnings from OptionMetrics’ Garrett DeSimone, Ph.D. Read the full article below.