bsImpliedVol: Compute implied volatility of plain vanilla European options...

Description Usage Arguments Details Value

View source: R/bsPlainVanilla.R

Description

Compute implied volatility of plain vanilla European options from market price using lognormal Black-76 model.

Usage

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bsImpliedVol(date, forward, strike, expiry, price, type = "call",
  discount = 1, model = "lognormal")

Arguments

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.

Details

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.

Value

Implied volatility estimate. The function is vectorized.


prodipta/bsoption documentation built on May 29, 2019, 2:57 p.m.