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- Volatility_smile abstract "Volatility smiles are implied volatility patterns that arise in pricing financial options. In particular for a given expiration, options whose strike price differs substantially from the underlying asset's price command higher prices (and thus implied volatilities) than what is suggested by standard option pricing models. These options are said to be either deep in-the-money or out-the-money.Graphing implied volatilities against strike prices for a given expiry yields a skewed "smile" instead of the expected flat surface. The pattern differs across various markets. Equity options traded in American markets did not show a volatility smile before the Crash of 1987 but began showing one afterwards. It is believed that investor reassessments of the probabilities of black swans have led to higher prices for out-the-money options. This anomaly implies deficiencies in the standard Black-Scholes option pricing model which assumes constant volatility and log-normal distributions of underlying asset returns. Empirical asset returns distributions on the other hand, tend to exhibit fat-tails (kurtosis) and skew. Modelling the volatility smile is an active area of research in quantitative finance, and better pricing models such as the stochastic volatility model partially address this issue.A related concept is that of term structure of volatility, which describes how (implied) volatility differs for related options with different maturities. An implied volatility surface is a 3-D plot that plots volatility smile and term structure of volatility in a consolidated three-dimensional surface for all options on a given underlying asset.".
- Volatility_smile thumbnail Volatility_smile.svg?width=300.
- Volatility_smile wikiPageExternalLink rpf232.pdf.
- Volatility_smile wikiPageExternalLink papers.cfm?abstract_id=1965977.
- Volatility_smile wikiPageExternalLink tokyo2002smile.pdf.
- Volatility_smile wikiPageExternalLink gs-volatility_smile.pdf.
- Volatility_smile wikiPageExternalLink www.thevolatilityskew.com.
- Volatility_smile wikiPageID "1533070".
- Volatility_smile wikiPageRevisionID "588742277".
- Volatility_smile hasPhotoCollection Volatility_smile.
- Volatility_smile subject Category:Mathematical_finance.
- Volatility_smile subject Category:Options_(finance).
- Volatility_smile type Abstraction100002137.
- Volatility_smile type Communication100033020.
- Volatility_smile type DerivativeInstrument106480506.
- Volatility_smile type Document106470073.
- Volatility_smile type LegalDocument106479665.
- Volatility_smile type Option113241600.
- Volatility_smile type Options.
- Volatility_smile type Writing106362953.
- Volatility_smile type WrittenCommunication106349220.
- Volatility_smile comment "Volatility smiles are implied volatility patterns that arise in pricing financial options. In particular for a given expiration, options whose strike price differs substantially from the underlying asset's price command higher prices (and thus implied volatilities) than what is suggested by standard option pricing models.".
- Volatility_smile label "Sorriso da volatilidade".
- Volatility_smile label "Volatility smile".
- Volatility_smile label "Volatilitäts-Smile".
- Volatility_smile sameAs Volatilitäts-Smile.
- Volatility_smile sameAs Sorriso_da_volatilidade.
- Volatility_smile sameAs m.058n7k.
- Volatility_smile sameAs Q915788.
- Volatility_smile sameAs Q915788.
- Volatility_smile sameAs Volatility_smile.
- Volatility_smile wasDerivedFrom Volatility_smile?oldid=588742277.
- Volatility_smile depiction Volatility_smile.svg.
- Volatility_smile isPrimaryTopicOf Volatility_smile.
