• Project Title: Using Black-Scholes' to Determine the Difference Between Historical and Implied Volatility

  • BASIS Advisor: Mr. Linhares

  • Internship Location: Cisco Systems

  • Onsite Mentor: Mr. Arun Athavale

In my Senior Project, I will work with Cisco Systems to find the differences between implied and historical volatility in various sectors by using corresponding sector ETF options. The volatility measure is essential to the accurate modeling of markets. Substantial research continues to occur in this field motivated by the necessity of banks quoting options. I will solve for implied volatility by reversing the Nobel-prize winning equation Black-Scholes and compare that to the standard deviation of an ETF which represents historical volatility. I will also discuss potential reasons for the differences in historical and implied volatility in various sectors by explaining market trends.