Option Pricing and Implicit Volatilities
AbstractThis paper demonstrates that Black-Scholes implied volatilities can be used to value options in many situations where the assumptions of the Black-Scholes model are violated, including (1) alternative stock processes, (2) stochastic interest rates, and (3) market frictions. Given its computational simplicity, this procedure provides an attractive alternative to the more complex models with a direct estimation procedure. Copyright 1989 by Blackwell Publishers Ltd
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Economic Surveys.
Volume (Year): 3 (1989)
Issue (Month): 1 ()
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0950-0804
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- Ncube, Mthuli, 1996. "Modelling implied volatility with OLS and panel data models," Journal of Banking & Finance, Elsevier, vol. 20(1), pages 71-84, January.
- Kaehler, Jürgen & Marnet, Volker, 1993. "Markov-switching models for exchange-rate dynamics and the pricing of foreign-currency options," ZEW Discussion Papers 93-03, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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