Assume that actual variance has the mean reverting term structure where ? 2 ? is the stationary
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Assume that actual variance has the mean reverting term structure
where ?2?is the stationary variance and ?2(0)?=??20. What is the implied volatility of an option at time t = 0?
Transcribed Image Text:
(t) do²(1) = 1(o - o²(1), dt
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To find the implied volatility of an option at time t 0 we can use the relationship between the actual volatility and the implied volatility under the ...View the full answer
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