Financial Innovation: Implied Volatility

This lecture explores how financial engineering tools can mitigate the economic risk associated with increasing scientific knowledge in the life sciences, allowing for faster development of new therapies. It covers topics such as implied volatility, historical volatility, Black-Scholes model, constructing the implied volatility surface, skewness in implied volatilities, implied distribution, and different volatility models like local volatility and stochastic volatility. The instructor discusses the implications of implied volatility on option pricing, the crashphobia hypothesis, and the SVI implied volatility surface model.