A graphical curve that charts the implied volatility of a group of options, with the same expiration date across various strike prices. The curve (which does represent a smile) shows that the implied volatility is higher as the option goes more In The Money (ITM) or Out Of The Money (OTM). Hence the demand is higher for ITM or OTM options rather than At The Money (ATM) options in the middle (lowest point) of the curve. This curve is commonly seen in the forex and near-term equity options market.
Related information about volatility smile:
- Volatility smile - Wikipedia, the free encyclopedia
In finance, the volatility smile is the pattern in which in- and out-of-the-money options are observed to have higher implied volatilities than at-the-money options.
- Volatility Smile by OptionTradingpedia.com
Probably The Most Comprehensive Explanation Of Volatility Smile In The World!
- Volatility Smile Definition | Investopedia
A common graphical shape that results from plotting the strike price and implied volatility of a group of options with the same expiration date.
- Laughter in the Dark - The Problem of the Volatility Smile
May 26, 2003 ... volatility smile, the surface changes over time. ... whose previous talks on the volatility smile helped me a great deal in preparing this talk.
- Volatility Smiles & Smirks Explained | The Options & Futures Guide
The volatility smile skew pattern is commonly seen in near-term equity options and options in the forex market. Volatility smiles tell us that demand is greater for ...
- Modeling the Volatility Smile - QuantCandy
Page 1 of 30. Stanford.Smile.fm. October 21, 2006. Modeling the Volatility Smile. Emanuel Derman. Columbia University. October 27, 2006 ...
- THE VOLATILITY SMILE
THE VOLATILITY SKEW. By Christina Lee and Ivana Lee. OVERVIEW. Volatility Skew; Black-Scholes Model; Types of Volatility Skews. Volatility Smile. Volatility ...
- Volatility Skew
Volatility smile (left) is compared to volatility skew (right). ... By increasing prices for such options, volatility smile could be the markets' indirect way of achieving ...