Option markets and implied volatility: Past versus present
AbstractTraders in the nineteenth century appear to have priced options the same way that twenty-first-century traders price options. Empirical regularities relating implied volatility to realized volatility, stock prices, and other implied volatilities (including the volatility skew) are qualitatively the same in both eras. Modern pricing models and centralized exchanges have not fundamentally altered pricing behavior, but they have generated increased trading volume and a much closer conformity in the level of observed and model prices. The major change in pricing is the sharp decline in implied volatility relative to realized volatility, evident immediately upon the opening of the CBOE.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Financial Economics.
Volume (Year): 94 (2009)
Issue (Month): 2 (November)
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Web page: http://www.elsevier.com/locate/inca/505576
Options Implied volatility;
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