The relationship between the volatility and the time to expiration is called the
A)volatility smile
B)volatility skew
C)term structure of volatility
D)theta
E)none of the above

Question

Quizplus · Accepted Answer

The volatility and the time to expiration relationship is called the term structure of volatility. The term structure of volatility refers to the shape of the implied volatility curve for a particular underlying asset. It shows how the implied volatility changes as the time to expiration changes. The term structure of volatility can have different shapes, such as a smile or a skew, but the relationship between volatility and time is what is being represented.

The Relationship Between the Volatility and the Time to Expiration