implyVolatility: imply the volatility of the certificate with Newton/Raphson

In fCertificates: fCertificates - Basics of Certificates and Structured Products Valuation

Description

The function implies the volatility of the certificate with one-dimensional Newton/Raphson method

Usage

implyVolatility(price, f, interval = c(0, 1), sigma = NULL, doPlot=FALSE, ...)

Arguments

price	current price of the certificate
f	The pricing function of the certificate, e.g. BonusCertificate
interval	interval to search for implied volatility
sigma	start value for the volatility
doPlot	flag whether to plot price function for convergence diagnostics. Defaults to FALSE
...	additional parameters passed to the pricing function, e.g. S=100, X=100 etc.

Value

returns the implied volatility if it can be implied. Otherwise NA.

Author(s)

Stefan Wilhelm [e-mail]

Examples

p <- DiscountCertificate(S=100, X=110, Time=1, r=0.01, r_d=0, sigma=0.5)
implyVolatility(price=p, DiscountCertificate, S=100, X=110, Time=1, r=0.01, r_d=0)
  
p <- DiscountCertificate(S=100, X=110, Time=1, r=0.01, r_d=0, sigma=0.5)
implyVolatility(price=p, DiscountCertificate, doPlot=TRUE, S=100, X=110, Time=1, r=0.01, r_d=0)

Example output

Loading required package: fBasics
Loading required package: timeDate
Loading required package: timeSeries
Loading required package: fOptions
Loading required package: fExoticOptions
$root
[1] 0.5

$f.root
[1] 8.01893e-09

$iter
[1] 4

$root
[1] 0.5

$f.root
[1] 8.01893e-09

$iter
[1] 4

fCertificates documentation built on May 2, 2019, 5:50 p.m.