FoundationMultiple choice
Forward volatility across the term structure · Part 1 of 3
On one stock, one-month implied volatility is 30% and three-month implied volatility is 24%. Treat the months as equal-length and ignore rates.
What volatility for the period from month one to month three do these quotes imply?
- AAbout 21%, from (3 × 24 − 30)/2
- BAbout 20.3%
- CAbout 27%, the average of the two quotes
- DAbout 18%, the three-month level less the six-point slope
The worked solution is in Premium
The answer, the full working and the one idea to take away – for this and all 1,322 questions in the bank. Answer it in practice and your working is marked, with a known mistake named when you make one.
Learn the method
More volatility questions
- At-the-money volatility is 19%, the 25-delta call is at 18% and the 25-delta put at 23%.Applied
- You buy the 25-delta call and sell the 25-delta put, each with vega 0.10 per…Applied
- Index implied correlation has tended to exceed the correlation later realised…Applied
- You believe index skew is too steep. What is the cleanest expression of that view?Advanced
- An index holds two stocks in equal weight, with implied volatilities of 30% and 20%.Advanced
- Index implied volatility is 18% and the average single-name implied volatility…Expert