If the Black-Scholes formula is solved to find the standard deviation consistent with the current market call premium, that standard deviation would be called the ________.
A) variability
B) volatility
C) implied volatility
D) deviance

Question

Quizplus · Accepted Answer

The standard deviation consistent with the current market call premium is called implied volatility. It is implied by the current market price of the option and represents the market's expectation of how volatile the underlying asset's price will be in the future.

If the Black-Scholes Formula Is Solved to Find the Standard