How does implied volatility decay affect the pricing of exotic options, particularly as the expiration date approaches?

What theta decay does to options — time value erodes faster as expiration approaches

Theta decay accelerates as expiration nears, diminishing options' time value

What the Black-Scholes formula prices — European call and put options

Black-Scholes prices European call and put options using volatility, interest rates, and time to expiration

What implied volatility tells you — the market's expectation of future price movement

Implied volatility indicates the market's anticipated future price fluctuation of an asset

How do implied volatility, beta, and alpha influence the pricing and risk management of equity options?

Implied volatility, beta, and alpha affect option pricing and risk management by indicating market sentiment, systemic risk, and stock performance respectively

What volatility smile shows — implied volatility varies with strike price, contradicting Black-Scholes

Volatility smile indicates implied volatility's non-linearity with respect to strike prices

What vega measures — an option's sensitivity to a 1% change in implied volatility

Vega measures an option's price change per 1% implied volatility adjustment