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F# for Quantitative Finance by Johan Astborg

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Chapter 6. Exploring Volatility

In this chapter, you will learn about volatility and using numerical methods in F# to explore the properties of options. We'll solve for the intrinsic volatility, called implied volatility, in the Black-Scholes model using the code from the previous chapter and extending it with numerical methods covered in Chapter 3, Financial Mathematics and Numerical Analysis.

In this chapter you will learn:

  • Actual volatility and implied volatility
  • Using F# to calculate actual volatility
  • Solving for implied volatility in Black-Scholes
  • Using numerical methods for options
  • Delta hedging
  • Briefly about volatility arbitrage

Introduction to volatility

In the previous chapter we looked at the basics behind Black-Scholes for European options. ...

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