Forecasting Volatility

Volatility forecasting has great applications in financial markets – from feeding in assumptions in models to risk management to derivatives pricing and trading. People have different methods in predicting volatility, and have developed different models…

The Volatility Smile Problem: From Within

By Elie Ayache: The smile problem isn’t something that happens to the Black–Scholes–Merton (BSM) model from outside. It is not a falsification of the BSM model. The smile problem isn’t that BSM assumes the underlying price process…