Hin, Lin-Yee; Dokuchaev, Nikolai - In: International Journal of Financial Markets and Derivatives 3 (2014) 4, pp. 392-408
This paper suggests a method of estimation of the implied volatility smile uncertainty of the observed options prices …. We consider the setting where both the implied volatility and the risk free rate are calculated jointly from the observed …, leading to uncertainty in the volatility surface. We estimate the size of implied volatility layers between the surfaces …