Implicit volatility is investors' understanding of the actual volatility when trading options in the option market, which has been reflected in the pricing process of options. Theoretically, it is not difficult to obtain implied volatility. Because the option pricing model gives the quantitative relationship between the option price and five basic parameters (St, X, R, T-t, σ).

As long as the first four basic parameters and the actual market price of options are substituted into the option pricing model as known quantities, the only unknown quantity σ can be solved, and its size is implied volatility. Therefore, implied volatility can be understood as the expectation of actual market volatility.

Option pricing model needs the actual volatility of the underlying asset price within the validity period of the option. Compared with the current period, it is an unknown number, so it needs to be replaced by predicted volatility. Generally speaking, historical volatility estimation can be simply used as forecast volatility.

But a better method is to combine quantitative analysis with qualitative analysis, take historical volatility as the initial forecast value, and constantly adjust and correct it according to quantitative data and newly obtained actual price data to determine the volatility.

Extended data:

Impact:

The volatility of underlying assets is an important factor in the pricing formula of Black-Scholes options. When calculating the theoretical price of options, the historical volatility of the underlying assets is usually used: the greater the volatility, the higher the theoretical price of options; Conversely, the smaller the volatility, the lower the theoretical price of the option. Positive influence of volatility on option price.

It can be understood as follows: for the buyer of options, because the cost of purchasing options has been determined, the greater the volatility of the underlying assets, the greater the possibility that the price of the underlying assets will deviate from the exercise price, and the greater the possible income, so the buyer is willing to pay more royalties to purchase options; For the seller of options.

Because the greater the volatility of the underlying assets, the greater the price risk they bear, so they need to charge higher patent fees. On the contrary, the smaller the volatility of the underlying assets, the smaller the potential income of the option buyer and the smaller the risk the option seller bears, so the lower the price of the option. ?

Baidu encyclopedia-volatility