ragtop (version 1.1.1)

implied_volatilities: Implied volatilities of european-exercise options under Black-Scholes or a jump-process extension

Description

Find default-free volatilities based on known interest rates and hazard rates, using a given option price.

Usage

implied_volatilities(
  option_price,
  callput,
  S0,
  K,
  r,
  time,
  const_default_intensity = 0,
  divrate = 0,
  borrow_cost = 0,
  dividends = NULL,
  relative_tolerance = 1e-06,
  max.iter = 100,
  max_vola = 4
)

Arguments

option_price

Present option values (may be a vector)

callput

1 for calls, -1 for puts (may be a vector)

S0

initial underlying price (may be a vector)

K

strike (may be a vector)

r

risk-free interest rate (may be a vector)

time

Time from 0 until expiration (may be a vector)

const_default_intensity

hazard rate of underlying default (may be a vector)

divrate

A continuous rate for dividends and other cashflows such as foreign interest rates (may be a vector)

borrow_cost

A continuous rate for stock borrow costs (may be a vector)

dividends

A data.frame with columns time, fixed, and proportional. Dividend size at the given time is then expected to be equal to fixed + proportional * S / S0. Fixed dividends will be converted to proprtional for purposes of this algorithm.

relative_tolerance

Relative tolerance in option price to achieve before halting the search

max.iter

Number of iterations to try before abandoning the search

max_vola

Maximum volatility to try in the search

Value

Scalar volatilities

See Also

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_volatility_with_term_struct(), implied_volatility()

Other European Options: black_scholes_on_term_structures(), blackscholes(), implied_volatilities_with_rates_struct(), implied_volatility_with_term_struct(), 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_volatility_with_term_struct(), implied_volatility()