Description Usage Arguments Details Value See Also
Extract implied probability distribution from option prices from a fitted vol model calibrated to market prices.
1 2 | impliedDistribution(vol, n = 512, bounds = c(-0.2, 0.2),
normalization = TRUE)
|
vol |
A vol object (either sabrvol or quadvol) obtained by calibrating to market prices of options. |
n |
Number of division for the range of strikes to generate the distribution. |
bounds |
The range (in percentage) of the underlying to estimate the distribution. |
normalization |
A logical value. If true, the implied distribution is normalized to sum up to 1, else not. |
Extracting probability density from the implied volatility of options is done using the standard method of taking the second derivatives of option prices with respect to strikes. The second derivative is estimated using the usual finite difference approach. The resulting distribution is the option implied risk neutral distribution. The strikes of the underlying of the distribution is always scaled so that the current forward is at 100.
A dataframe with strikes and corresponding probability density function estimates.
calibrate
for calibration and volatility models
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