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Uniform bounds for Black--Scholes implied volatility

Accepted version
Peer-reviewed

Type

Article

Change log

Authors

Tehranchi, MR 

Abstract

In this note, Black--Scholes implied volatility is expressed in terms of various optimization problems. From these representations, upper and lower bounds are derived which hold uniformly across moneyness and call price. Various symmetries of the Black--Scholes formula are exploited to derive new bounds from old. These bounds are used to reprove asymptotic formulas for implied volatility at extreme strikes and/or maturities.

Description

Keywords

implied volatility, put-call symmetry, asymptotic formulas

Journal Title

SIAM Journal on Financial Mathematics

Conference Name

Journal ISSN

1945-497X
1945-497X

Volume Title

7

Publisher

Society for Industrial and Applied Mathematics