Work detail

Volatility smile of options

Author: Bc. Dominik Plaček
Year: 2022 - summer
Leaders: prof. PhDr. Ladislav Krištoufek Ph.D.
Consultants:
Work type: Bachelors
Language: English
Pages: 40
Awards and prizes:
Link: https://dspace.cuni.cz/handle/20.500.11956/175582
Abstract: This bachelor’s thesis introduces the basics of financial derivatives, especially
options, and also clearly derives the Black Scholes model. A partial goal is
to understand this derivation and, above all, to revise erroneous assumptions,
especially those about volatility and the stochastic distribution of underlying
asset prices. The solution offers several perspectives on volatility modeling and
introduces their properties. The problematic Volatility smile is empirically verified using options data of companies Apple and Microsoft. The final discussion
indicates which solution is appropriate to develop further. From a practical
point of view, it introduces the methods that traders use in practice
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