Implied volatility measures

dc.contributorAalto Universityen
dc.contributorAalto-yliopistofi
dc.contributor.advisorMurto, Pauli
dc.contributor.advisorMustonen, Mikko
dc.contributor.authorYli-Niemi, Markus
dc.contributor.departmentTaloustieteen laitosfi
dc.contributor.schoolKauppakorkeakoulufi
dc.contributor.schoolSchool of Businessen
dc.date.accessioned2019-04-21T16:01:10Z
dc.date.available2019-04-21T16:01:10Z
dc.date.issued2018
dc.description.abstractIn this thesis the construction of implied volatility measures is considered. Two popular option pricing models, namely Black-Scholes model and Cox-Ross-Rubinstein binomial model, are derived, solved and their inversion is considered to obtain implied volatility estimates. In addition, current market volatility indexes used by practitioners are discussed and Chicago Board Options Exchange's (CBOE) VIX index is derived in detail. Implied volatility measures rely heavily on the underlying assumptions of the option pricing models. In this thesis we assume the underlying asset to follow the geometric Brownian motion. The geometric Brownian motion is derived and the implications of the motion are discussed. Also, other assumptions in the pricing models are discussed. Due to some unrealistic assumptions in the pricing models, implied volatility measures have limitations and problems. These problems are introduced and the ways to alleviate these problems are discussed.en
dc.format.extent25+3
dc.format.mimetypeapplication/pdfen
dc.identifier.urihttps://aaltodoc.aalto.fi/handle/123456789/37516
dc.identifier.urnURN:NBN:fi:aalto-201904212637
dc.language.isoenen
dc.programmeTaloustiedeen
dc.subject.keywordimplied volatilityen
dc.subject.keywordCBOE VIX indexen
dc.subject.keywordBlack-Scholes modelen
dc.subject.keywordCox-Ross-Rubinstein binomial modelen
dc.titleImplied volatility measuresen
dc.typeG1 Kandidaatintyöfi
dc.type.ontasotBachelor's thesisen
dc.type.ontasotKandidaatintyöfi

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