Risk glossary


Volatility smile

Smile refers to the characteristic curve in a chart that shows implied volatility of a security, as derived with the Black-Scholes model with respect to its strike price. Typically, the lowest point of the smile corresponds to the at-the-money price, while for in-the-money and out-of-the-money prices implied volatility tends to be higher. This is interpreted as the market perception of a greater risk embedded in options as the price diverges from the at-the-money value.

Click here for articles on volatility smile. 

  • LinkedIn  
  • Save this article
  • Print this page  

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here