Risk 1 - Hans Buehler
Risk 1 - Hans Buehler
Risk 1 - Hans Buehler
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Implied Vol<br />
8346<br />
9737<br />
11128<br />
12519<br />
13910<br />
15301<br />
16692<br />
18083<br />
19474<br />
Modeling <strong>Risk</strong> – Local Volatility<br />
Black & Scholes – Implied Volatility<br />
• Using the BS volatility s BS as a free parameter, we can invert the BS<br />
formula to back out the so-called ―BS implied volatility‖ surface of the<br />
Market<br />
market.<br />
70%<br />
60%<br />
50%<br />
40%<br />
30%<br />
1Y<br />
2Y<br />
3Y<br />
3M<br />
Strike<br />
Example: HSI Mar 25, 2009 @ 13,910<br />
23
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