Implicit volatility is the investors' understanding of the actual volatility when trading options in the option market, and this understanding has been reflected in the pricing process of options. Theoretically, it is not difficult to obtain the implied volatility. Because the option pricing model gives the quantitative relationship between the option price and five basic parameters (St, X, R, T-t and σ).

As long as the first four basic parameters and the actual market price of options are substituted into the option pricing model as known quantities, the only unknown quantity σ can be solved, and its size is implied volatility. Therefore, implied volatility can be understood as the expectation of actual volatility in the market.

The option pricing model needs the actual volatility of the underlying asset price within the validity period of the option. Compared with the current period, it is an unknown quantity, so it needs to be replaced by predicted volatility. Generally, historical volatility estimation can be simply used as predicted volatility.

But a better method is to combine quantitative analysis with qualitative analysis, take historical volatility as the initial forecast value, and constantly adjust and correct it according to quantitative data and newly obtained actual price data to determine the volatility.

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The volatility of underlying assets is an important factor in Black-Scholes option pricing formula. When calculating the theoretical price of options, the historical volatility of the underlying assets is usually used: the greater the volatility, the higher the theoretical price of options; Conversely, the smaller the volatility, the lower the theoretical price of options. Positive influence of volatility on option price.

It can be understood as follows: for the buyer of options, because the cost of buying options has been determined, the greater the volatility of the underlying assets, the greater the possibility that the price of the underlying assets will deviate from the exercise price, and the greater the possible income, so the buyer is willing to pay more royalties to buy options; For the seller of options.

Because the greater the volatility of the underlying assets, the greater the price risk they bear, so they need to charge higher royalties. On the contrary, the smaller the volatility of the underlying assets, the smaller the potential income of the buyer of the option and the smaller the risk borne by the seller of the option, so the lower the price of the option. ?

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