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Questions tagged [implied-volatility]

The implied volatility of an option contract is that value of the volatility of the underlying instrument which when input in an option pricing model such as Black–Scholes will return a theoretical value equal to the current market price of the option.

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Does Black Scholes exhibit the volatility smile?

You often hear about the volatility smile. Is that something that occurs within a standard Black Scholes model, with the usual formula for the price of a call? If we were to observe some call price (...