Implied volatility


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Implied volatility

The expected volatility in a stock's return derived from its option price, maturity date, exercise price, and riskless rate of return, using an option pricing model such as Black-Scholes.

Implied Volatility

An estimation of the volatility of a stock as calculated by the price of an option on that stock. The factors used in determining a stock's implied volatility are the maturity date, exercise price, and riskless rate of return. One of the most common models used in estimating implied volatility is the Black-Scholes Option Pricing Model.
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In constructing the implied volatility indices for each stock we follow the same approach as the construction of the VIX.
Following market practice, implied volatility here is defined by inverting the BlackScholes formula from an option price.
The box shows that as long as the underlying asset has a positive risk premium, the implied volatility from the options could be higher than a historical measure of volatility.
Other factors may also affect both the exchange rate and volatility, entailing that the observed relationship between the exchange rate and implied volatility is spurious.
Table 2 The Delta-Neutral Portfolio on the Next Day When Implied Volatility Changes
The Morningstar Volatility Index (MVI) is unique in that it is an aggregate of the implied volatility of individual options within an index, rather than the volatility of the index itself.
50 put has an implied volatility of 75 percent compared to the July 17.
NYSE: KR) has seen a spike in its implied volatility as its turn in the earnings confessional draws nearer.
This number tells us where current implied volatility levels stand in relation to the past 90 days of trading.
Another sign of the high demand for puts over calls lies in the implied volatility of the equity's out-of-the-money options.
More specifically, the strategist is targeting a sluggish or range-bound stock with an historical volatility level significantly lower than the implied volatility levels of its in-the-money options.
The Euro/Dollar also has the lowest implied volatility at 9.