The Volatility Smile Drug Addiction The journey that started a

The journey that started a hundred years ago throttles towards its end

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a concerto for a father and daughter

they must learn to dissemble

where frenzied riots give way to Olympic fever

The Volatility Smile Drug Addiction The journey that started aThe Black Scholes Merton option model was the greatest innovation of twentieth century finance, and remains the most widely applied theory in all of finance. Nevertheless, the model is fundamentally at odds with the observed behavior of option markets: a graph of implied volatility against strike will typically display a curve or smile, which the model cannot explain. Option valuation is not a solved problem, and the past forty years have witnessed an