Financial Risk Manager Part 2
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Equity options tend to exhibit a volatility "smirk" where low strike price options have a higher implied volatility than high strike price options. An explanation that has not been used for the smirk pattern is:
Equity options tend to exhibit a volatility "smirk" where low strike price options have a higher implied volatility than high strike price options. An explanation that has not been used for the smirk pattern is:
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A
heteroscedasticity in the underlying
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