Two unconditionally implied parameters and volatility smiles and skews
نویسندگان
چکیده
منابع مشابه
Implied volatility skews and stock return skewness and kurtosis implied by stock option prices
The Black–Scholes* option pricing model is commonly applied to value a wide range of option contracts. However, the model often inconsistently prices deep in-the-money and deep out-of-the-money options. Options professionals refer to this well-known phenomenon as a volatility ‘skew’ or ‘smile’. In this paper, we examine an extension of the Black–Scholes model developed by Corrado and Su‡ that s...
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The construction of martingales with given marginal distributions at given times is a recurrent problem in financial mathematics. From a theoretical point of view, this problem is well-known as necessary and sufficient conditions for the existence of such martingales have been described. Moreover several explicit constructions can even be derived from solutions to the Skorokhod embedding proble...
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We investigate the relative importance of various factors in explaining the volatility smile observed in the prices of options on individual stocks traded on the Chicago Board Options Exchange. First, we verify that, on average, the slope of the volatility smile on stock options is slightly negative, but not as steep as the smile for S&P 500 index options. Second, we find that stocks that have ...
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The Black-Scholes (1973) option pricing model is used to value a wide range of option contracts. However, the model often inconsistently prices deep in-themoney and deep out-of-the-money options. Options’ professionals refer to this phenomenon as a volatility ‘skew’ or ‘smile.’ In this paper, we apply an extension of the Black-Scholes model developed by Jarrow and Rudd (1982) to an investigatio...
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We address the problem of defining and calculating forward volatility implied by option prices when the underlying asset is driven by a stochastic volatility process. We examine alternative notions of forward implied volatility and the information required to extract these measures from the prices of European options at fixed maturities. We then specialize to the SABR model and show how the asy...
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ژورنال
عنوان ژورنال: Applied Financial Economics Letters
سال: 2006
ISSN: 1744-6546,1744-6554
DOI: 10.1080/17446540500426771