Accuracy of Implied Volatility Approximations Using "Nearest-to-the-Money" Option Premiums
Implied volatility is a useful bit of information for futures and options hedgers and speculators. However, extraction of implied volatility from Black-Scholes (BS) option pricing model requires a numeric search. Since 1988, there have been numerous simplifying modifications to the BS formula proposed and presented in the applied economics and finance literature to allow approximation of implied volatility directly. This study identifies and tests these simplification methods for accuracy for call only and put-call average elicitation of an implied volatility estimate. Results show that accuracy varies by method and whether call only or put-call average approaches are applied.
|Date of creation:||2007|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.saea.org/|
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ags:saeasm:34927. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If references are entirely missing, you can add them using this form.