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whether 'implied' is a hidden risk

September 2nd, 2017, 2:17 pm

 In math in order to clarify or justify meaningfulness of new notions or obtained results it is 101 rule to bring simple examples of the notions ore obtained results. When I think that someone drive the car which makes implied turns or someone account receives implied bills the notions of 'implied' for something seems to me corrupted, included randomness and 'implied' risk. 'Implied' volatility risk is one that say a trader think that he writes option on a stock [$]( \mu , \sigma)[$] and in reality it is an option on a heuristic asset [$]( r , \sigma_{implied} )[$]. Here the drift parameters [$] r , \mu[$] are independent or weakly independent on each other variables and volatility parameters [$]\sigma , \sigma_{implied}[$] generally speaking are functionally dependent. Thus observations on the real underlying can make some sense for option valuations