The Volatility Smile (Wiley Finance) 1st Edition

4.7 out of 5 stars 51 ratings
ISBN-13: 978-1118959169
ISBN-10: 1118959167
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Frequently bought together

  • The Volatility Smile (Wiley Finance)
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Editorial Reviews

From the Inside Flap

The Volatility Smile provides an accessible account of both the classic Black-Scholes-Merton option model and the newer extensions of the model that have been developed over the past forty years. In contrast to textbooks that accentuate formality over intuition and understanding, The Volatility Smile explores both the ideas and the mathematics behind the models, walking a middle line between the rigor of the academic world and the practical insights of the trading desk. Based on a clear formulation of the principles of financial modeling, The Volatility Smile is also a book about how to evaluate and build financial models.

Prior to the 1987 global stock market crash, the Black-Scholes-Merton option valuation model seemed to describe option markets reasonably well. Since the crash, however, equity index option markets have displayed a persistent volatility smile, in blatant disagreement with the Black-Scholes-Merton model. Quants around the world have labored over the preceding decades to extend the Black-Scholes-Merton model to accommodate this anomaly.

Good financial models begin not with mathematics but with an understanding of the behavior of securities and markets. The first half of this book therefore focuses on the theory of option valuation, a study of the Black-Scholes-Merton model, illustrations of how to make practical use of it, and a discussion of its limitations. The second half provides an analysis of the empirical behavior of the volatility smile, and a detailed account of multiple ways in which the Black-Scholes-Merton model can be extended so as to rectify its inadequacies. In particular, the book provides a detailed account of the local volatility model, stochastic volatility models, and jump-diffusion.

From the Back Cover

The Volatility Smile provides an accessible account of both the classic Black-Scholes-Merton option model and the newer extensions of the model that have been developed over the past forty years. In contrast to textbooks that accentuate formality over intuition and understanding, The Volatility Smile explores both the ideas and the mathematics behind the models, walking a middle line between the rigor of the academic world and the practical insights of the trading desk. Based on a clear formulation of the principles of financial modeling, The Volatility Smile is also a book about how to evaluate and build financial models.

Prior to the 1987 global stock market crash, the Black-Scholes-Merton option valuation model seemed to describe option markets reasonably well. Since the crash, however, equity index option markets have displayed a persistent volatility smile, in blatant disagreement with the Black-Scholes-Merton model. Quants around the world have labored over the preceding decades to extend the Black-Scholes-Merton model to accommodate this anomaly.

Good financial models begin not with mathematics but with an understanding of the behavior of securities and markets. The first half of this book therefore focuses on the theory of option valuation, a study of the Black-Scholes-Merton model, illustrations of how to make practical use of it, and a discussion of its limitations. The second half provides an analysis of the empirical behavior of the volatility smile, and a detailed account of multiple ways in which the Black-Scholes-Merton model can be extended so as to rectify its inadequacies. In particular, the book provides a detailed account of the local volatility model, stochastic volatility models, and jump-diffusion.


Product details

  • Publisher ‏ : ‎ Wiley; 1st edition (September 6, 2016)
  • Language ‏ : ‎ English
  • Hardcover ‏ : ‎ 528 pages
  • ISBN-10 ‏ : ‎ 1118959167
  • ISBN-13 ‏ : ‎ 978-1118959169
  • Item Weight ‏ : ‎ 1.68 pounds
  • Dimensions ‏ : ‎ 6.1 x 1.7 x 9 inches
  • Customer Reviews:
    4.7 out of 5 stars 51 ratings

Customer reviews

4.7 out of 5 stars
4.7 out of 5
51 global ratings
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Reviewed in the United States on September 21, 2016
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Reviewed in the United States on September 13, 2018
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Reviewed in the United States on October 26, 2018
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Reviewed in the United States on December 23, 2019
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Reviewed in the United States on August 21, 2017
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Reviewed in the United States on October 18, 2016
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Reviewed in the United States on June 28, 2017
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Reviewed in the United States on April 25, 2017
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Top reviews from other countries

Amazon Customer
5.0 out of 5 stars Situation of the book
Reviewed in the United Kingdom on June 1, 2018
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Minh
5.0 out of 5 stars Easy introductory book for a hard subject
Reviewed in Australia on March 19, 2021
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Guillermo
5.0 out of 5 stars An amazing book
Reviewed in Mexico on September 29, 2017
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脱北者
5.0 out of 5 stars クオンツよりもトレーダー、特にエクイティオプション担当者向け
Reviewed in Japan on November 19, 2017
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Feanor
3.0 out of 5 stars Summary of Volatility models
Reviewed in the United Kingdom on May 8, 2017
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4 people found this helpful
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