- CFA Exams
- CFA Level I Exam
- Study Session 14. Derivatives
- Reading 38. Valuation of Contingent Claims
- Subject 6. Option Greeks and Implied Volatility
CFA Practice Question
Which is a measure of future volatility?
B. Implied volatility
C. There is no such measure.
A. Historical volatility
B. Implied volatility
C. There is no such measure.
Correct Answer: B
Implied volatility is a measure of future volatility, whereas historical volatility is a measure of past volatility. Option prices reflect the beliefs of option market participants about the future volatility of the underlying.
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