Accuracy of Implied Volatility Approximations Using "Nearest-to-the-Money" Option Premiums

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dc.creatorIsengildina-Massa, Olga
dc.creatorCurtis, Charles E., Jr.
dc.creatorBridges, William
dc.creatorNian, Minhuan
dc.date2017-04-01T18:26:07Z
dc.date.accessioned2026-07-09T04:24:21Z
dc.descriptionImplied volatility is a useful bit of information for futures and options hedgers and speculators. However, extraction of implied volatility from Black-Scholes (BS) option pricing model requires a numeric search. Since 1988, there have been numerous simplifying modifications to the BS formula proposed and presented in the applied economics and finance literature to allow approximation of implied volatility directly. This study identifies and tests these simplification methods for accuracy for call only and put-call average elicitation of an implied volatility estimate. Results show that accuracy varies by method and whether call only or put-call average approaches are applied.
dc.identifierdoi:10.22004/ag.econ.34927
dc.identifierhttps://ageconsearch.umn.edu/record/34927/files/sp07is02.pdf
dc.identifierhttp://ageconsearch.umn.edu/record/34927
dc.identifier.urihttp://hdl.handle.net/123456789/549407
dc.languageeng
dc.publisher
dc.sourcehttp://ageconsearch.umn.edu/record/34927
dc.titleAccuracy of Implied Volatility Approximations Using "Nearest-to-the-Money" Option Premiums
dc.typeText

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