Strike-implied volatility is typically observed in reality

Assignment Help Financial Management

Reference no: EM132062662

If the Black model is correct, what should be the relation between the strike price on options on a futures contract (such as on natural gas future) and the volatilities implied by the prices of these options? What relation between strike and implied volatility is typically observed in reality? Provide a brief explanation of what can account for the observed strike-implied volatility relation. Why might the “smile” “smirk” towards the “call wing”? Why might it “smirk” towards the put wing?

Looking to get some help on this question.

Reference no: EM132062662

Questions Cloud

Calculate the wacc assuming tax rate : Given the following information for Pinehurst Co., calculate the WACC assuming a tax rate of 35%.

What is the present value cost : The lease payment will be made in the beginning of the years. If the real rates are 5%, what is the present value cost.

Largely determined the value of the dow divisor : Over the years ____________________ have largely determined the value of the Dow divisor.

What is tbks cost of capital on this new project : Assume TBK will carry the same cost for each source of capital, what is TBK’s cost of capital on this new project?

Strike-implied volatility is typically observed in reality : What relation between strike and implied volatility is typically observed in reality?

What price will the bonds sell : If the yield to maturity on bonds of this risk class is 10 per cent, at what price will the bonds sell?

What is the expected profit of granting credit : What is the expected profit of granting credit? Should Cast Iron grant or refuse credit? Grant Refuse

Sellout performance to generate a total revenue : How many tickets should be sold at each price for a sellout performance to generate a total revenue of $144500

Find the maximum torque in shaft b : The shaft B carries a flywheel of mass 30 kg. If the radius of gyration of the flywheel is 100 mm, find the maximum torque in shaft B

User Account

All Pages