Questions tagged [implied]

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Implied state price density (Question 1 - derivation of the formula)

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 ...
6
votes
1answer
764 views

Implied interest rate using put-call parity

In the process of asking this question, I acutally found the solution. I still let this post open if it can be interesting to someone else and have added a related question at the end. I want to ...
3
votes
1answer
2k views

Implied probability density (Question 2 - Applications and Interpretation)

Using the second derivative of the Call-Option-Price one can try to recover the pricing density. Formally: Assuming a constant interst rate $r$ and also not making any assumptions on the model ...
8
votes
2answers
484 views

Confusion with volatility smiles implied by different models

I am reading a book "The concepts and practice of mathematical finance" by Mark Joshi. In Chapter 18 he discusses the shapes and dynamics of smiles under different models. I do not understand what is ...