The arbitrage inconsistencies of implied volatility extraction in connection to calendar bandwidth

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F67985556%3A_____%2F15%3A00507127" target="_blank" >RIV/67985556:_____/15:00507127 - isvavai.cz</a>
Alternative codes found
RIV/61989100:27510/15:86094778
Result on the web
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DOI - Digital Object Identifier
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Result language
angličtina
Original language name
The arbitrage inconsistencies of implied volatility extraction in connection to calendar bandwidth
Original language description
Options are often priced by Black and Scholes model by using artificial (and unobserved) volatility implied by option market prices. Since many options do not have their traded counterparts with the same maturity and moneyness, it is often needed to interpolate the volatility values. The general procedure of implied volatility extraction from market prices and subsequent smoothing can, however, lead to inconsistent values or even arbitrage opportunities. In this paper, a potential arbitrage area is studied in connection with the calendar bandwidth construction.
Czech name
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Czech description
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Project
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Continuities
I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Publication year
2015
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Article name in the collection
Proceedings of 10th International Scientific Conference Financial management of firms and financial institutions Ostrava
ISBN
978-80-248-3865-6
ISSN
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e-ISSN
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Number of pages
5
Pages from-to
1405-1409
Publisher name
VŠB-Technická univerzita Ostrava
Place of publication
Ostrava
Event location
Ostrava
Event date
Sep 7, 2015
Type of event by nationality
WRD - Celosvětová akce
UT code for WoS article
000376799500173

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