Implied volatility functions: empirical tests

Abstract

Black and Scholes (1973) implied volatilities tend to be systematically related to the option’s exercise price and time to expiration. Derman and Kani (1994), Dupire (1994), and Rubinstein (1994) attribute this behavior to the fact that the Black/Scholes constant volatility assumption is violated in practice. These authors hypothesize that the volatility of… (More)
DOI: 10.1109/CIFER.1996.501845

Topics

4 Figures and Tables

Slides referencing similar topics