Volume Visualization of Payoff Regions for Derivatives Risk Management

Abstract

Volume visualization of derivatives helps us discover risks, which hitherto have been elusive with traditional surface plots. In this paper, we would like to address the volatility visualization issue, which is one of the critical components in Option pricing, by incorporating volume visualization for better risk management. By enabling the visualization of volatility changes in risk profiling, combining with another two Option s value determinants (i.e. the underlying asset spot price and days to maturity), a much better understanding about the risk involved in a portfolio can be achieved, particularly when the fluctuation of the asset is highly uncertain.