Markets: A Rigorous Course
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M09A · Problem 10 ★★ Check

Calendar monotonicity and forward volatility

(a) Prove Proposition 9A.8. (b) On 6 Oct 2026 the Nifty ATM IVs were 12.15% (7 days), 12.55% (13 days) and 12.55% (21 days) (bhavcopy). Compute the total variances and the forward volatilities for days 7–13 and 13–21. (c) If the 13-day IV had been 11.0%, what would you conclude?

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Commas, ₹, % and 1e-3 notation are accepted.

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