Monday, November 02, 2009

BookValue

Option Trading

Sasidharan K. and Alex K. Mathews

(www.tatamcgrawhill.com)

Volatility smile

Quant, as a topic to study, may not bring a smile to the numerically-challenged among most us, who may, in all probability, wince at hearing that an active area of research in quantitative finance is the modelling of the volatility smile. "Typically, a quantitative analyst will calculate the implied volatility from liquid vanilla options and use models of the smile to calculate the price of more exotic options," write Sasidharan K. and Alex K. Mathews in Option Trading: Bear Market Strategies.

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