In the founders’ decades of experience in derivatives market-making, we
had the good fortune of building a pricing, fitting, and trading infrastructure several times,
usually from scratch:
— for the equities flow and exotics businesses at Goldman Sachs,
— for the volatility arbitrage fund at JD Capital,
— and for the brand-new options market making business at Getco in the US and Asia (one of very few successful new options market-making launches since the early-2007 "penny pilot").
Building a competitive options business is a daunting task, especially today. It requires most or all of these components: a low latency infrastructure to receive exchange data and send orders, a scalable system to handle the huge number of traded options, a deep knowledge of market micro-structure, the exchange landscape, risk management, and very fast and robust algorithms to imply borrow cost curves and volatility surfaces, and for pricing and risk calculations. This also requires a deep understanding of order book dynamics, dividend modeling and volatility curve design questions, among others.
Up to now, every serious new options trading entrant had to try to build all their analytics in-house, with huge opportunity cost and risk of failure. Many firms, from high-frequency traders to hedge funds and investment banks, have tried and failed to build an options trading/market making business in the last decade.
With a background in solving hard-core numerical and calibration problems, first in physics (lattice QCD) and then in finance, we figured out how to produce, in real time, arbitrage-free, parametric volatility curves and implied borrows for even the hardest-to-fit names like SPY and AAPL (including the W-shaped volatility curves around earnings) in the equity domain, and ES (E-mini) and CL (crude) in the futures domain, suitable for high-frequency electronic trading, as well as flow and structured products desks. Many years worth of hard-won domain knowledge went into the design and tuning of our pricing and fitting infrastructure.
We realized that it does not make sense for every new entrant in the field to try to solve these hard problems again and again. This idea gave rise to Vola Dynamics. We are confident our valuation infrastructure is vastly faster and more robust than any other system in existence (all vendor systems fail on the very basic level of not having borrow costs or sensible volatility curves).
Whether you just want to address some pain points in your current valuation infrastructure (like the pricer or fitter), or are building a trading system from scratch, we can help.
We have been selected as a Futures Industry Association's FIA innovator in 2016.
We rebranded ourselves in 2017 from Volar Technologies LLC to Vola Dynamics LLC.