AppliedMultiple choice
On equity indices implied volatility has, on average, exceeded subsequently realised volatility. What is the standard explanation?
- AOption pricing models systematically overestimate volatility because of rounding in the formula
- BA variance risk premium
- CRealised volatility is always measured with too few data points to capture true volatility
- DMarket makers are required by regulators to quote implied volatility above realised
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