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First of all, may I point out two big misperceptions that you may have: Implied Volatility (IV) is the input to any vanilla option pricing model (not just Black Scholes (BS) that impacts the pricing the most. You can verify this by flipping through the different risk exposures (greeks and higher order sensitivities) and study mean volatilities in such risk ...


1

The focus on volatility comes about because all price changes "look like" volatility, no matter their source. Improvements in volatility treatment are therefore conflated with improvements in the model, and typically when people consider altered models, they first look to how well the alterations do in providing prices that explain skew for the classical ...



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