Definition of «implied volatility»

Implied volatility is a measure of how much an option price deviates from its theoretical value, which is based on the underlying stock's historical volatility. It represents the market's expectation of future volatility and can be used to determine whether options are overvalued or undervalued relative to their expected move in response to a given event.

Phrases with «implied volatility»

Sentences with «implied volatility»

  • Under contingent claims theory, spreads should narrow when equity prices rise, and when implied volatility of equity options falls. (alephblog.com)
  • That will manifest itself in option implied volatility, which is a crude measure of what people would pay to gain and lose exposure to the equity of the company. (alephblog.com)
  • Because of this, the decline in implied volatility for the indices and individual companies has been a major factor in the spread compression that has happened. (alephblog.com)
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