Volatility smile - Financial definition
Concise definition of the term volatility smile
The term volatility smile describes the phenomenon where the implied volatility of an option increases as its exercise price deviates from the underlying asset's price. The name is derived from the shape of the curve that depicts the relationship between the strike prices of a series of options with the same maturity and underlying asset, along with their corresponding implied volatility.
Comprehensive definition of the term volatility smile
Below is a graphical illustration of the volatility smile.
