BinaryOptionImpliedVolatility: Implied Volatility calculation for Binary Option

Description Usage Arguments Details Value Note Author(s) References See Also Examples

View source: R/implied.R

Description

The BinaryOptionImpliedVolatility function solves for the (unobservable) implied volatility, given an option price as well as the other required parameters to value an option.

Usage

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## Default S3 method:
BinaryOptionImpliedVolatility(type, value, underlying,
		strike, dividendYield, riskFreeRate, maturity, volatility,
		cashPayoff=1)

Arguments

type

A string with one of the values call, put or straddle

value

Value of the option (used only for ImpliedVolatility calculation)

underlying

Current price of the underlying stock

strike

Strike price of the option

dividendYield

Continuous dividend yield (as a fraction) of the stock

riskFreeRate

Risk-free rate

maturity

Time to maturity (in fractional years)

volatility

Initial guess for the volatility of the underlying stock

cashPayoff

Binary payout if options is exercised, default is 1

Details

The Finite Differences method is used to value the Binary Option. Implied volatilities are then calculated numerically.

Please see any decent Finance textbook for background reading, and the QuantLib documentation for details on the QuantLib implementation.

Value

The BinaryOptionImpliedVolatility function returns an numeric variable with volatility implied by the given market prices.

Note

The interface might change in future release as QuantLib stabilises its own API.

Author(s)

Dirk Eddelbuettel edd@debian.org for the R interface; the QuantLib Group for QuantLib

References

https://www.quantlib.org/ for details on QuantLib.

See Also

EuropeanOption,AmericanOption,BinaryOption

Examples

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BinaryOptionImpliedVolatility("call", value=4.50, strike=100, 100, 0.02, 0.03, 0.5, 0.4, 10)

Example output

sh: 1: cannot create /dev/null: Permission denied
[1] 0.3621236
attr(,"class")
[1] "BinaryOptionImpliedVolatility" "ImpliedVolatility"            

RQuantLib documentation built on Oct. 6, 2021, 5:06 p.m.