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A comment on Jane Street barred from Indian markets as regulator freezes $566 million. Parent comment

Re:Jane Street barred from Indian markets as regulator freez... by pclmulqdq on Sunday July 06, 2025 @07:33PM (#44485138)
Things like Black-Scholes (using past volatility of the underlying to model the probability distribution in the future) are often used by market makers to price options, but the vanilla version never is.
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Re:Jane Street barred from Indian markets as regulator freez... by rybosworld on Sunday July 06, 2025 @07:45PM (#44485215)
Any market maker pricing options with Black-Scholes won't be a market maker for long.

Black-Scholes is just a customer-facing description of the option (i.e, it provides greeks that everyone can understand). But it isn't used as a starting point.

In practice, MM will back out what the implied volatility is from current prices. Then a stochastic volatility model is calibrated against that.

https://en.wikipedia.org/wiki/Stochastic_volatility

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Re:Jane Street barred from Indian markets as regulator freez... by mcakes on Sunday July 06, 2025 @10:52PM (#44486308)
No - no market maker is using stochastic volatility. (L)SV is only used for exotics. Market makers use a tricked out Black Scholes where the 'secret sauce' is in how you apply the chain rule when you calculate the greeks.
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Re:Jane Street barred from Indian markets as regulator freez... by rybosworld on Monday July 07, 2025 @12:11PM (#44491808)
Would be curious to know more about this.
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