Description Usage Arguments Details Value
View source: R/bsPlainVanilla.R
Compute implied volatility of plain vanilla European options from market price using lognormal Black-76 model.
1 2 | bsImpliedVol(date, forward, strike, expiry, price, type = "call",
discount = 1, model = "lognormal")
|
date |
Value date of the option. |
forward |
Forward level(s) of the underlying. |
strike |
strike(s) of the option. |
expiry |
Expiry date(s). |
price |
Option market price(s). |
type |
Option type - "call" or "put". |
discount |
Discount factor. |
model |
Model type, only lognormal is implemented. |
Black's formula is arguably more useful for pricing index options compared to traditional Black-Scholes formula. The Black-76 option pricing model uses the price of futures directly, instead of accreting the spot index at the cost of carry. This is useful where the index futures trade at prices below spot plus cost of carry, providing a model consistent with market. In many places this is now standard to use Black-76 for index options valuation for margining and fair value determination purposes.
Implied volatility estimate. The function is vectorized.
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