The implied volatility is obtained by finding the standard deviation that, when used in the Black-Scholes-Merton model, makes the
A) model price expire at zero
B) model price equal the market price of the option
C) model price such that it exceeds currently traded market option values
D) model price equal the intrinsic value of the underlying stock
E) none of the above

Question

Quizplus · Accepted Answer

The implied volatility is the volatility value that, when used in the Black-Scholes-Merton model, produces a theoretical option price that is equal to the market price of the option.

The Implied Volatility Is Obtained by Finding the Standard Deviation