Ok. I have a software system that prices options. The system contains a volatility smile structure, example, ATM and then +5 +10 +15 -5 -10 -15 in or out of the money etc based on strike price. So my problem is, should I just compute the implied volatility based on our banks statments (that contain the price of the option, baisally backing into their vols) they give us? Or can I come up with my own vols using some other skew type assuming there is no implied volatility. I really need help on this. Thanks in advance to anyone who can help.

QuoteOriginally posted by: Flare1Ok. I have a software system that prices options. The system contains a volatility smile structure, example, ATM and then +5 +10 +15 -5 -10 -15 in or out of the money etc based on strike price. So my problem is, should I just compute the implied volatility based on our banks statments (that contain the price of the option, baisally backing into their vols) they give us? Or can I come up with my own vols using some other skew type assuming there is no implied volatility. I really need help on this. Thanks in advance to anyone who can help.Ok, I'm not really clear on exactly what you need to accomplish. Step 1: Don't Panic. Are you trying to price the options as of today, say intra-day? ...and you want to know if you should use yesterday's settle vols? That's not a bad first crack at it. What would be even better is to get a current market quote and back out those vols - then solve for the prices of your options.

depends what your job is. If you're a trader you either mark the vols yourself or check out Bloomberg/Reuters for current vols.If you want an independant value of your book, check out people like Markit or brokers.