Here is a question i had for a long time but i never asked. Let's take an easy example, AirBnb will likely have an IPO soon, the stock will be quoted on the market. Let's say i would like to price an option on this stock, how would i proceed ?

For sure i could sell some with a premium equal to the spot, and wait for the secondary market to adjust, and then extract the IV to do a better pricing, but i would still need to find people to buy at that price.

So in practice how does it work, there is no underlying historical data, nor implied volatility available.

Do you have an idea ?

Thank you

  • 1
    $\begingroup$ With completely no historical stock price, the best I can think of is to find several companies in the same business (e.g. BOOKING for AIRBNB) and look at the range of their vols. Then estimate which percentile it will be in this range according to the size of the company. This is very very raw estimate. Once the stock starts trading then you can adjust. $\endgroup$
    – CABLE
    Aug 19, 2020 at 12:54
  • $\begingroup$ Thank you, and let's say you have historical price value but there is no option priced for this underlying, would you suggest another approach ? Or let's say when a bank release a new serie let say a client want to CALL on SPX mat 50Years, there is no implied vol so how do they price the option? $\endgroup$ Aug 19, 2020 at 18:35


Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Browse other questions tagged or ask your own question.