What is the correct meaning of implied volatility?

Cited 0 time in webofscience Cited 0 time in scopus
  • Hit : 936
  • Download : 6
This paper presents a closed-form solution for the valuation of European options under the assumption that the excess returns of an underlying asset follow a diffusion process. In light of our model, the implied volatility computed from the Black-Scholes formula should be viewed as the volatility of excess returns rather than as the volatility of gross returns. Using the SPX and the OMX options data, we test whether implied volatility obtained from Black-Scholes option price explains the volatilities of excess returns better than gross returns, even though the result is not statistically significant. ? 2007 Elsevier Inc. All rights reserved.
Publisher
Elsevier BV
Issue Date
2007
Language
English
Citation

FINANCE RESEARCH LETTERS, v.4, no.3, pp.179 - 185

ISSN
1544-6123
URI
http://hdl.handle.net/10203/4051
Appears in Collection
MT-Journal Papers(저널논문)
Files in This Item

qr_code

  • mendeley

    citeulike


rss_1.0 rss_2.0 atom_1.0