BinaryOptionImpliedVolatility {RQuantLib} | R Documentation

## Implied Volatility calculation for Binary Option

### Description

The `BinaryOptionImpliedVolatility` function solves for the (unobservable) implied volatility, given an option price as well as the other required parameters to value an option.

### Usage

    ## Default S3 method:
    BinaryOptionImpliedVolatility(type, value, underlying,
                    strike, dividendYield, riskFreeRate, maturity, volatility,
                    cashPayoff=1)

    ## S3 method for class 'ImpliedVolatility':
    print
    ## S3 method for class 'ImpliedVolatility':
    summary

### Arguments

`type` | A string with one of the values `call`, `put` or `straddle`
`value` | Value of the option (used only for ImpliedVolatility calculation)
`underlying` | Current price of the underlying stock
`strike` | Strike price of the option
`dividendYield` | Continuous dividend yield (as a fraction) of the stock
`riskFreeRate` | Risk-free rate
`maturity` | Time to maturity (in fractional years)
`volatility` | Initial guess for the volatility of the underlying stock
`cashPayoff` | Binary payout if options is exercised, default is 1

### Details

The Finite Differences method is used to value the Binary Option. Implied volatilities are then calculated numerically.

Please see any decent Finance textbook for background reading, and the `QuantLib` documentation for details on the `QuantLib` implementation.

### Value

The `BinaryOptionImpliedVolatility` function returns an object of class `ImpliedVolatility`. It contains a list with the following elements:

`impliedVol` | The volatility implied by the given market prices
`parameters` | List with the option parameters used

### Note

The interface might change in future release as `QuantLib` stabilises its own API.

### Author(s)

Dirk Eddelbuettel edd@debian.org for the R interface; the QuantLib Group for `QuantLib`

### References

http://quantlib.org for details on `QuantLib`.

### See Also

`EuropeanOption`,`AmericanOption`,`BinaryOption`

### Examples

    BinaryOptionImpliedVolatility("call", value=4.50, strike=100, 100, 0.02, 0.03, 0.5, 0.4, 10)

[Package RQuantLib version 0.2.7 Index]