Tweaking Implied Volatility

9 Pages Posted: 2 Sep 2004

See all articles by Charles J. Corrado

Charles J. Corrado

Deakin University - School of Accounting, Economics & Finance

Thomas W. Miller

Mississippi State University - College of Business; Saint Louis University - Department of Finance

Date Written: September 2004

Abstract

Hallerbach (2004) derives an approximation formula to compute a Black-Scholes implied volatility. This formula is equivalent to equation (7) in Corrado and Miller (1996a), with the substitution of a geometric average of stock and strike prices in place of an arithmetic average. Ceteris paribus the same numerical values are obtained. Although useful in a pedagogic setting, even with tweaking neither formula has the robustness typically required for commercial or research applications.

Keywords: Options, implied volatility, implied standard deviation

JEL Classification: C13, C63, G13

Suggested Citation

Corrado, Charles J. and Miller, Thomas William and Miller, Thomas William, Tweaking Implied Volatility (September 2004). Available at SSRN: https://ssrn.com/abstract=584982 or http://dx.doi.org/10.2139/ssrn.584982

Charles J. Corrado (Contact Author)

Deakin University - School of Accounting, Economics & Finance ( email )

221 Burwood Highway
Burwood, Victoria 3215
Australia
61492446214 (Phone)

Thomas William Miller

Saint Louis University - Department of Finance ( email )

3674 Lindell Blvd
Saint Louis, MO 63108-3397
United States
314-977-3851 (Phone)
314-977-1479 (Fax)

Mississippi State University - College of Business ( email )

Mississippi State, MS 39762-0964
United States

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