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People ~5 years ago were certainly using Black Scholes where I worked, just with a lot of caveats. The volatility smile you describe only really applies to out-
by omeze 7y ago
People ~5 years ago were certainly using Black Scholes where I worked, just with a lot of caveats. The volatility smile you describe only really applies to out-of-the-money puts - people trading with black scholes as a signal will look at the at-the-money strikes.
- beezle 7y agoAt the end of the day, excepting edge cases, the spread on most listed equity options absorbs any difference between model pricing.