Compute the implied volatility

Reference no: EM131453842

Question: The table below gives prices for American Airlines (AMR) options on 12 July 2007. The option with exercise price X = $27.50 is assumed to be the at-the-money option.

a. Compute the implied volatility of each option (use the functions CallVolatility and PutVolatility defined in the chapter).

b. Graph these volatilities. Is there a volatility "smile"?

Reference no: EM131453842

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