Description Usage Arguments Details Value See Also Examples
Use the Black-Scholes formula to generate European option values and run them through Newton's method until a constant volatility matching the provided option price has been found.
1 2 3 4 5 6 7 8 9 10 11 12 | implied_volatility_with_term_struct(
option_price,
callput,
S0,
K,
time,
...,
starting_volatility_estimate = 0.5,
relative_tolerance = 1e-06,
max.iter = 100,
max_vola = 4
)
|
option_price |
Option price to match |
callput |
1 for calls, -1 for puts |
S0 |
initial underlying price |
K |
strike |
time |
Time to expiration |
... |
Further arguments to be passed on to |
starting_volatility_estimate |
The Newton method's original guess |
relative_tolerance |
Relative tolerance in instrument price defining the root-finder halting condition |
max.iter |
Maximum number of root-finder iterations allowed |
max_vola |
Maximum volatility to try |
Differs from implied_volatility
by calling black_scholes_on_term_structures
for
pricing, thereby allowing term structures of rates, and a nontrivial survival_probability_fcn
Estimated volatility
implied_volatility
for simpler cases with constant
parameters, black_scholes_on_term_structures
for the underlying
pricing algorithm, implied_volatilities_with_rates_struct
when
neither volatilities nor survival probabilities have a nontrivial term structure
Other Implied Volatilities:
american_implied_volatility()
,
equivalent_bs_vola_to_jump()
,
equivalent_jump_vola_to_bs()
,
fit_variance_cumulation()
,
implied_jump_process_volatility()
,
implied_volatilities_with_rates_struct()
,
implied_volatilities()
,
implied_volatility()
Other Equity Independent Default Intensity:
american_implied_volatility()
,
american()
,
black_scholes_on_term_structures()
,
blackscholes()
,
equivalent_bs_vola_to_jump()
,
equivalent_jump_vola_to_bs()
,
implied_volatilities_with_rates_struct()
,
implied_volatilities()
,
implied_volatility()
Other European Options:
black_scholes_on_term_structures()
,
blackscholes()
,
implied_volatilities_with_rates_struct()
,
implied_volatilities()
,
implied_volatility()
1 2 3 4 5 6 7 8 9 10 11 12 13 14 | ## Dividends
divs = data.frame(time=seq(from=0.11, to=2, by=0.25),
fixed=seq(1.5, 1, length.out=8),
proportional = seq(1, 1.5, length.out=8))
surv_prob_fcn = function(T, t, ...) {
exp(-0.07 * (T - t)) }
disc_factor_fcn = function(T, t, ...) {
exp(-0.03 * (T - t)) }
implied_volatility_with_term_struct(
option_price = 12, S0 = 150, callput=PUT,
K = 147.50, time=1.5,
discount_factor_fcn=disc_factor_fcn,
survival_probability_fcn=surv_prob_fcn,
dividends=divs)
|
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