Re:The Trillion Dollar Equation [video]
by drexlspivey on Sunday March 03, 2024 @02:18PM
(#39583506)
The parameter (sigma) is the historical volatility (stdev of annualized returns). Implied volatility is what you get if you run the formula backwards and input the observed price to solve for volatility. In practice though many people use implied volatility as the input making the whole thing circular.
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Re:The Trillion Dollar Equation [video]
by RandomLensman on Sunday March 03, 2024 @02:51PM
(#39583834)
It's no really circular, just think of IV as the price/what is traded.