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arXiv · 1512.06812

Uniform bounds for Black--Scholes implied volatility

Michael R. Tehranchi
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Abstract

In this note, Black--Scholes implied volatility is expressed in terms of various optimisation problems. From these representations, upper and lower bounds are derived which hold uniformly across moneyness and call price. Various symmetries of the Black--Scholes formula are exploited to derive new bounds from old. These bounds are used to reprove asymptotic formulae for implied volatility at extreme strikes and/or maturities.

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Michael R. Tehranchi. 2016-08-31. Uniform bounds for Black--Scholes implied volatility. https://doi.org/10.1137/14095248x

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