# Tag Info

4

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 ...

3

I think you would find the following paper very useful. It compares different pricing models applied to VIX options. You can use it as starting point to apply to VSTOXX options and see where it gets you. The Performance of VIX Option Pricing Models: EmpiricalEvidence Beyond Simulation The following models were tested: Whaley (1993) Grunbichler and ...

2

There is another approach to compute Implied Volatility, namely the Model Free Implied Volatility (MFIV). According to this link: "Unlike the traditional concept of implied volatility, where the implied volatility is estimated numerically from an option pricing model, the model free implied volatility (MFIV) is not dependent on any option pricing ...

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 ...

1

This article discusses the problem on the German electricity market. They arrive at the following conclusion:"When the B&S model is used to calculate implied volatilities one often obtain different numbers for different values of K and T. In particular, a "smile" or "smirk" shape is often observed in the plot of implied volatility versus strike price. ...

Only top voted, non community-wiki answers of a minimum length are eligible