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Volatility smile is referred to as evidence against the Black-Scholes model. Why is that? a. Black-Scholes model generates option premium close to the observed premium
Volatility smile is referred to as evidence against the Black-Scholes model. Why is that?
a. | Black-Scholes model generates option premium close to the observed premium if the observed stock volatility is used | |
b. | Black-Scholes model assumes that different options on a given stock have different values for implied volatility | |
c. | Volatility of returns on one and the same stock, over one and the same future period of time, can only take one value |
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