Which of the following statements is most accurate? Implied volatility: Requires market prices. Requires a series…
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Question “Which of the following statements is most accurate? Implied volatility: Requires market prices. Requires a series…”
Which of the following statements is most accurate? Implied
volatility:
Requires market prices.
Requires a series of past returns.
Is equal for otherwise identical options with different
maturities.
Answer
Answer:- Option a):- Requires market price
Explanation – Implied Volatility is calculated by taking into account the market price and then entering it into Black-Scholes.
Option (b), is not the right answer, because Implied Volatility is a forward-looking measure that does not require a series past returns.
Option c is not the right answer, The theoretical value of implied volatility must be the same for two options that share the same underlying asset or expiration date.
Conclusion
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