volatility-smile

Learning objectives: Describe the volatility smile for equity options and foreign currency options and provide possible explanations for its shape. Describe alternative ways of characterizing the volatility smile. Describe volatility term structures and volatility surfaces and how they may be...

Learning objectives: Define a volatility smile and volatility skew. Explain the implications of put-call parity on the implied volatility of call and put options. Compare the shape of the volatility smile (or skew) to the shape of the implied distribution of the underlying asset price and to the...