Probabilistic Interpretation of an Implied Volatility Smile


When the variance rates implied from option prices differ across strike prices, at most one of them can be interpreted as the variance rate of the underlying security price. We develop an arbitrage-free option pricing model... [ view full abstract ]


  1. Peter Carr (New York University)
  2. Liuren Wu (Baruch College, CUNY)

Topic Areas

Options , Stochastic Volatility


FR-A-BU » Variance, Implied Volatility and Pricing (10:00 - Friday, 20th July, Burke Theater)

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