Monthly Archives: December 2012

Implied Volatility in Merton’s Jump Diffusion Model

The “implied volatility” corresponding to an option price is the value of the volatility parameter for which the Black-Scholes model gives the same price. A well-known phenomenon in market option prices is the “volatility smile”, in which the implied volatility … Continue reading

Posted in Options, Stochastic Differential Equations, Volatility Modeling | Tagged , , , | Comments Off