Implied Volatility of Leveraged ETF Options

@article{Leung2015ImpliedVO,
  title={Implied Volatility of Leveraged ETF Options},
  author={Tim Leung and R. Sircar},
  journal={Applied Mathematical Finance},
  year={2015},
  volume={22},
  pages={162 - 188}
}
  • Tim Leung, R. Sircar
  • Published 2015
  • Economics
  • Applied Mathematical Finance
  • Abstract This paper studies the problem of understanding implied volatilities from options written on leveraged exchanged-traded funds (LETFs), with an emphasis on the relations between LETF options with different leverage ratios. We first examine from empirical data the implied volatility skews for LETF options based on the S&P 500. In order to enhance their comparison with non-leveraged ETFs, we introduce the concept of moneyness scaling and provide a new formula that links option implied… CONTINUE READING
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