Option Data and Modeling BSM Implied Volatility

Fengler, Matthias R.

Option Data and Modeling BSM Implied Volatility

HANDBOOK OF COMPUTATIONAL FINANCE, Springer-Verlag, Chapter 6, pp.117-142, edited by Jin-Chuan Duan, Wolfgang Karl Härdle, James E. Gentle, 2012

26 Pages Posted: 5 Sep 2011 Last revised: 1 Nov 2013

See all articles by Matthias R. Fengler

Matthias R. Fengler

University of St. Gallen - School of Economics and Political Science; Swiss Finance Institute

Date Written: December 12, 2010

Abstract

This contribution to the Handbook of Computational Finance, Springer-Verlag, gives an overview on modeling implied volatility data. After introducing the concept of Black-Scholes-Merton implied volatility (IV), the empirical stylized facts of IV data are reviewed. We then discuss recent results on IV surface dynamics and the computational aspects of IV. The main focus is on various parametric, semi- and nonparametric modeling strategies for IV data, including ones which respect no-arbitrage bounds.

Keywords: implied volatility

JEL Classification: G13

Suggested Citation: Suggested Citation

Fengler, Matthias R., Option Data and Modeling BSM Implied Volatility (December 12, 2010). HANDBOOK OF COMPUTATIONAL FINANCE, Springer-Verlag, Chapter 6, pp.117-142, edited by Jin-Chuan Duan, Wolfgang Karl Härdle, James E. Gentle, 2012, Available at SSRN: https://ssrn.com/abstract=1922441