How Does Implied Volatility Calculation Factor into Quoting for Crypto Options RFQs? ⎊ Path

How Does Implied Volatility Calculation Factor into Quoting for Crypto Options RFQs?

Implied Volatility (IV) is the primary input for options pricing models, reflecting the market's expectation of future price movement. The quoting engine calculates IV by inverting the Black-Scholes model using current market prices for similar options.

The RFQ quote is then based on the provider's proprietary IV surface, which is dynamically adjusted based on market data and risk appetite. Accurate IV calculation is paramount for profitable options market making.

How Does IV Relate to the Black-Scholes Model for Option Pricing?

What Is the Relationship between the Volatility Surface and the Concept of ‘Local Volatility’?

What Is “Implied Volatility” and How Is It Derived from the Black-Scholes Model?

How Is Implied Volatility (IV) Calculated from the Market Price of an Option?

Are There Alternative Models to Black-Scholes for Pricing Options?

Are There Other Models besides Black-Scholes Used to Calculate Implied Volatility?

Which Volatility Measure Is Used as an Input in the Black-Scholes Model and Which Is the Output?

What Is a Volatility Surface and How Is It Constructed from Market Data?

Glossar

Implied Volatility Calculation

Pricing Input ⎊ Implied Volatility Calculation is the process of reverse-engineering the volatility input required by an option pricing model, typically Black-Scholes or a variation, to match the observed market price of the derivative contract.