Detlefsen, Kai (contributor); Härdle, Wolfgang (contributor) - 2005
gratefully acknowledged.
JEL classification: C13, G19
1.1 Introduction
Trading, hedging and risk analysis of complex option …)
volatility parameter. The put option price P
t
can be obtained from the put-call
parity P
t
= C
t
− S
t
+ e
−τr
K.
2
1.2 Implied … volatility surface
For a European option the implied volatility ˆσ is defined as the volatility – σ,
which yields the BS price C …