Implied Volatility Functions: Empirical Tests
نویسندگان
چکیده
منابع مشابه
Implied volatility functions: empirical tests
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 the underlying asset’s return is a de...
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Dumas, Fleming, Whaley (DFW, 1998) find that option models based on deterministic volatility functions (DVF) perform poorly because the estimated volatility function is unstable over time. DFW provide evidence that the DVF changes significantly on a weekly basis. This paper proposes a new class of dynamic implied volatility function models (DIVF). This class of models separates a time-invariant...
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An examination of implied volatilities for Swedish equity options shows a rather U-shaped smile pattern when the volatilities are averaged within groups according to their moneyness. The detected volatility smile makes the use of at-the-money implied volatilities for valuation of inor out-of-the-money options questionable. The at-the-money implied volatilities work well for valuing at-the-money...
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For any strictly positive martingale S = e for which X has an analytically tractable characteristic function, we provide an expansion for the implied volatility. This expansion is explicit in the sense that it involves no integrals, but only polynomials in log(K/S0). We illustrate the versatility of our expansion by computing the approximate implied volatility smile in three well-known martinga...
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ژورنال
عنوان ژورنال: The Journal of Finance
سال: 1998
ISSN: 0022-1082
DOI: 10.1111/0022-1082.00083