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Derivatives and Risk Management, 1st Edition
book

Derivatives and Risk Management, 1st Edition

by Sundaram Janakiramanan
May 2024
Intermediate to advanced content levelIntermediate to advanced
542 pages
27h 26m
English
Pearson India
Content preview from Derivatives and Risk Management, 1st Edition
The Black–Scholes Options Pricing Model 407
16.9 Implied Volatility
In developing the options pricing formula, we use the volatility measure. However, it is also possible to
calculate the volatility measure from the option price. Since C = f (S
t
, S
X
, T, s, r
f
), if we know the value of
any ve of these values, we can always estimate the value of the sixth one. us, if we know C, S
t
, S
X
, T,
and r
f
, we can calculate the volatility measure s. When the volatility is calculated from the current option
price, the calculated volatility is called the implied volatility of the option.
Implied volatility is considered a better measure of volatility, because it shows the volatility estimate
that is used in calculating the option price. is measure can ...
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Publisher Resources

ISBN: 9781299447547Publisher Website