Assume that actual variance has the mean reverting term structure where 2 is the stationary variance and 2 (0) 2 0 What is the implied volatility of an option at time t 0 (t) do(1) 1(o o(1), dt...

To find the implied volatility of an option at time t 0 we can use the relationship between the actual volatility and the implied volatility under the ...

Assume that actual variance has the mean reverting term structure where ? 2 ? is the stationary

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Assume that actual variance has the mean reverting term structure

where ?²_?is the stationary variance and ?²(0)_?=_??²₀. What is the implied volatility of an option at time t = 0?

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A First Course in Quantitative Finance

ISBN: 978-1108419574

1st edition

Authors: Thomas Mazzoni

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Question Posted: Feb 19, 2020 09:39 AM

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Assume that actual variance has the mean reverting term structure where ? 2 ? is the stationary

Question:

(t) do²(1) = 1(o - o²(1), dt

Step by Step Answer:

To find the implied volatility of an option at time t 0 we can use the relationship between the actual volatility and the implied volatility under the ...View the full answer

A First Course in Quantitative Finance

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