3-11-21 - *Time Decay-implied volatility is highest where...

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Derivatives November 21 *Volatility -only non-observable variable -historical volatility -predictive models >ARCH (Robert Engle) >GARCH -weighted average historical volatility -implied volatility real-time measurement -VIX – Exchange traded volatility option >1993 >S&P 500 implied volatility -is a major component of valuation
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Unformatted text preview: *Time Decay-implied volatility is highest where time premium is highest-usually at the money *Volatility Surface-the volatility that exists across a range of asset prices-similar to term structure of interest rates-tells us which options to buy and sell >“deeps and cheaps” often misprices, avoid them...
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This note was uploaded on 12/21/2011 for the course SPEA V366 taught by Professor Aleksey during the Fall '11 term at UCSB.

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