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.
Homework Answers
Answer:- Option (a):- Requires market prices
Explanation:- Implied volatility is calculated by taking into consideration the market price of the option and entering it into the Black-Scholes formula.
Option (b) is not the answer because Implied volatility is a forward-looking metric, hence it does not requires a series of past returns.
Option (c) is not the answer because the theoretical value of an implied volatility must be identical if two options share the same underlying asset and expiration date.
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