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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