Local Volatility Models
A)Look to Describe Volatility Accurately Locally in Time

question 5

Multiple Choice

Local volatility models

• A)Look to describe volatility accurately locally in time (i.e. ,around the current time)but not necessarily in the longer run.
• B)Look to describe volatility accurately locally in space (i.e. ,around the current stock price \(S\)
• )but not necessarily when stock prices move away from current levels.
• C)Look to identify the form \(\sigma \left( S _ { t } , t \right)\)
• For evolution of volatility that will give rise to the currently observed set of option prices.
• D)And stochastic volatility models are exactly the same thing.

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Definitions:

Distribution

The process of taking goods from production to consumption.

Production to Consumption

The process that encompasses all stages from the creation of goods and services to their final use by consumers.

Standardization

The process of implementing and developing technical standards to ensure consistency and compatibility of products and services.

Pricing

The method of determining the value at which a product or service will be sold to consumers.