The volatility of its share price reflects the volatility of the market value of a bank’s assets. We present data for the volatilities of individual banks’ shares that are implied by the prices of options on the banks’ shares. We present evidence that implied volatilities (IV’s) better forecast actual, future volatilities of share prices than historical volatilities do. Banks’ IV’s are correlat...

Given the price of a call or put option, the Black-Scholes implied volatility is the unique volatility parameter for which the Bulack-Scholes formula recovers the option price. This article surveys research activity relating to three theoretical questions: First, does implied volatility admit a probabilistic interpretation? Second, how does implied volatility behave as a function of strike and ...

This paper studies the relation between implied and realized volatility by using daily S&P 500 index option price over the period between January 1995 and December 1999. In particular, we want to test the how different measurement errors affect the stability of this relationship. Two sources of measurement errors are considered. The first one is the measurement error in realized volatility. Fou...

The aim of this study is to examine the volatility smile based on European options Shanghai stock exchange 50 ETF. data gives evidence existence a well-known U-shaped implied for SSE ETF market in China. For those near-month options, smirk also observed. And remains high short maturity and decreases as increases. patterns indicate that in-the-money out-of-the-money are more expensive relative a...

We implement an estimator of the model-free implied volatility derived by Britten-Jones and Neuberger (2000) and investigate its information content in the S&P 500 index options. In contrast to the commonly used Black-Scholes implied volatility, the model-free implied volatility is not based on any specific option pricing model and thus provides a direct test of the informational efficiency of ...