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| Titel: |
What could potentially aggravate implicit volatility 'smile' and 'asymmetry'? - a note |
| Auteur: |
Jiang, George J. |
| Verschenen in: |
Applied economics letters |
| Paginering: | Jaargang 9 (2002) nr. 2 pagina's 75-80 |
| Jaar: |
2002-02-10 |
| Inhoud: |
This research note shows that the implied Black-Scholes volatility calculated using the bisection algorithm can have significant biases, which are more severe for in-themoney (ITM) options than for out-of-the-money (OTM) options. The biases are shown to have important implications as they could potentially aggravate the well-documented smile or smirk and asymmetry of implied Black-Scholes volatility for equity options. The findings caution the use of bisection algorithm for the calculation of Black-Scholes implied volatility. This research note also shows that the biases can be eliminated using the optimization algorithm which uses at least the first derivative of the objective function. |
| Uitgever: |
Routledge |
| Bronbestand: |
Elektronische Wetenschappelijke Tijdschriften |
Details van artikel 190 van 190 gevonden artikelen
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