Volatility Forecasting and Interpolation
Forecasting volatility is important to financial asset pricing because a more accurate forecast will allow for a more accurate model to price financial assets. Currently the VIX is used as a measure of volatility in the market as a whole, but a major issue with this is that it is calculated based on manually traded options on the S&P 500. Another method of forecasting volatility is that of solving for volatility from the Black-Scholes model in option pricing, but this method is not consistent across prices; for different strike prices, a different volatility will be found, creating what is known ...
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