After mastering option pricing models and exotic derivatives, we now turn to one of the most important practical concepts in quantitative finance: implied volatility. While the Black–Scholes model assumes volatility is known, in real markets, volatility is not directly observable—it must be backed out from market option prices. This process of solving for the volatility that makes a theoretical price match the observed market price is called implied volatility estimation.

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Implied Volatility

  • Aaron De la Rosa

摘要

After mastering option pricing models and exotic derivatives, we now turn to one of the most important practical concepts in quantitative finance: implied volatility. While the Black–Scholes model assumes volatility is known, in real markets, volatility is not directly observable—it must be backed out from market option prices. This process of solving for the volatility that makes a theoretical price match the observed market price is called implied volatility estimation.