Linked Questions

Suppose I have the following data (for the current stock and option prices of the Bank of America) Strike Last IV Probability 4 8 5.43 0.5813566 0.0000000 7 11 2.45 0.2868052 ...

Based on this topic: How to derive the implied probability distribution from B-S volatilities? I am trying to implement the Breeden-Litzenberger formula to compute the market implied risk-neutral ...

If we know the options Implied Volatility (IV) skew for an equity, is it possible to calculate the probability of the equity moving, given a move in the IV? We can define IV skew as the difference ...

Suppose that i have data that for each day i have more than one option, either put or call. I.E. I have more than 20 put options and 20 call options for each specific day. What is the way to estimate ...

Let $L(t, T_1, T_2)$ be the forward LIBOR rate at time $t$ for the period $T_1$ to $T_2$. If a security pays some multiple of $L(T_1, T_1, T_2)$ at time $T_1$, how can we show that the price of this ...

I came upon the term "implied state price density" in a couple of papers. As far as I understand the concept one basically tries to extract the "pricing density" from the market data. For the sake ...

Please forgive me if this is a dumb question. I know only the basics of options and their valuation, and this is a question I've wondered for some time without being able to find a satisfactory answer ...

I don't understand the words "risk-neutral density". Please explain what it is, and how it can be estimated in practice. My guess would be that we have an underlying probability space $(\Omega, P)$. ...

I am stuck at a assignment problem where I have to compute the price of an exotic option. I am given the values the prices of option $C(X;k) = E[max(0,X_T - k)]$ for different strike prices $k$ and ...

Possible Duplicate: How to derive the implied probability distribution from B-S volatilities? Let's assume a stock price S, with volatility $\sigma$ constant, no dividend, and risk free interest ...

There is a statement in John Hull's book Options, Futures and Other Derivatives 9th page 633 for the relation between ...

From volatility surfaces we have a implied distribution of $S_T$. This distribution is the real world distribution or this is a risk neutral distribution?

I am trying to model the ending value of a stock after a certain number of years, I need it for a bigger project but I made this sample sheet to get help. This sheet is assuming that annual returns ...