No-Arbitrage Condition of Option Implied Volatility and Bandwidth Selection
The result's identifiers
Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F67985556%3A_____%2F14%3A00429805" target="_blank" >RIV/67985556:_____/14:00429805 - isvavai.cz</a>
Result on the web
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DOI - Digital Object Identifier
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Alternative languages
Result language
angličtina
Original language name
No-Arbitrage Condition of Option Implied Volatility and Bandwidth Selection
Original language description
A standard approach to option pricing is based on Black-Scholes type (BS hereafter) models utilizing the no-arbitrage argument of complete markets. However, there are several crucial assumptions, such as that the option underlying log-returns follow normal distribution, there is unique and deterministic riskless rate as well as the volatility of underlying log-returns. Since the assumptions are generally not fulfilled, the BS-type models mostly provide false results. A common market practice is therefore to invert option pricing model and using market prices of highly liquid options to get a so called implied volatility (IV). The BS model at one time moment can be related to the whole set of IVs as given by maturity/moneyness relation of tradable options. One can therefore get IV curve or surface (a so called smirk or smile). Since the moneyness and maturity of IV often do not match the data of valuated options, some sort of estimating and local smoothing is necessary.
Czech name
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Czech description
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Classification
Type
J<sub>x</sub> - Unclassified - Peer-reviewed scientific article (Jimp, Jsc and Jost)
CEP classification
AH - Economics
OECD FORD branch
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Result continuities
Project
<a href="/en/project/GA13-25911S" target="_blank" >GA13-25911S: Arbitrage-free modelling of implied volatility.</a><br>
Continuities
I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace
Others
Publication year
2014
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů
Data specific for result type
Name of the periodical
The Anthropologist: international journal of contemporary and applied studies of man
ISSN
0972-0073
e-ISSN
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Volume of the periodical
17
Issue of the periodical within the volume
3
Country of publishing house
IN - INDIA
Number of pages
5
Pages from-to
751-755
UT code for WoS article
000340016100007
EID of the result in the Scopus database
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