volatility surface

A volatility surface is a three-dimensional graphical representation that shows how the volatility of options varies with different strike prices and expiration dates. In finance, volatility refers to how much the price of an asset is expected to fluctuate. The surface helps traders identify patterns and discrepancies in option pricing, allowing them to make informed decisions. It typically appears as a surface over a grid, with higher volatility levels often shown as peaks and lower levels as valleys, providing insights into market sentiment and risk expectations.