Question: Use the volatility surface below to compute: (1) the implied volatility of a 1 year and 8 months option with a strike price of 1.09;

Use the volatility surface below to compute:

(1) the implied volatility of a 1 year and 8 months option with a strike price of 1.09;

(2) the implied volatility of a 2 years and 4 months option with a strike price of 0.93.

Use the volatility surface below to compute: (1)

Table 25.1 Volatility Surface Volatilities for different strike prices and ma- turities are shown as % per annum. Strike Price 0.90 0.95 1.00 1.05 1.10 1-month 14.2 13.0 12.0 13.1 14.5 3-month 14.0 13.0 12.0 13.1 14.2 6-month 14.1 13.3 12.5 13.4 14.3 1-year 14.7 14.0 13.5 14.0 14.8 2-year 15.0 14.4 14.0 14.5 15.1 5-year 14.8 14.6 14.4 14.7 15.0

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