Option Pricing and Implicit Volatilities

Robert Jarrow () and James B Wiggins

Journal of Economic Surveys, 1989, vol. 3, issue 1, 59-81

Abstract: This paper demonstrates that Black-Scholes implied volatilities can be used to value options in many situations where the assumptions of the Black-Scholes model are violated, including (1) alternative stock processes, (2) stochastic interest rates, and (3) market frictions. Given its computational simplicity, this procedure provides an attractive alternative to the more complex models with a direct estimation procedure. Copyright 1989 by Blackwell Publishers Ltd

Date: 1989
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