A Quantum Model of Implied Volatility

Orrell D (2024) A quantum model of implied volatility. Wilmott 2024(131).

10 Pages Posted: 21 Mar 2024

Date Written: February 21, 2024

Abstract

The quantum implied volatility (QIV) model is a minimalistic model of an implied volatility surface. It is derived by assuming that the implied volatility is the volatility which, when used as input to the Black-Scholes model, will produce the correct option price under a previously-derived quantum model of asset price. In its base form, the model uses only two parameters to simulate a volatility surface over different strikes and expirations. Results can be improved by adding additional parameters such as a drift term. The method is illustrated using data from the S&P 500 index, as well as individual stocks.

Keywords: financial options, implied volatility, stock markets, quantum economics, quantum finance

JEL Classification: G10, G12

Suggested Citation

Orrell, David, A Quantum Model of Implied Volatility (February 21, 2024). Orrell D (2024) A quantum model of implied volatility. Wilmott 2024(131)., Available at SSRN: https://ssrn.com/abstract=4734169

David Orrell (Contact Author)

Systems Forecasting ( email )

Canada

HOME PAGE: http://www.systemsforecasting.com

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
136
Abstract Views
324
Rank
405,319
PlumX Metrics