EuropeanOptionImpliedVolatility  package:RQuantLib  R Documentation

_I_m_p_l_i_e_d _V_o_l_a_t_i_l_i_t_y _c_a_l_c_u_l_a_t_i_o_n _f_o_r _E_u_r_o_p_e_a_n _O_p_t_i_o_n

_D_e_s_c_r_i_p_t_i_o_n:

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

_U_s_a_g_e:

     ## Default S3 method:
     EuropeanOptionImpliedVolatility(type, value,
             underlying, strike, dividendYield, riskFreeRate, maturity, volatility)

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

_A_r_g_u_m_e_n_t_s:

    type: A string with one of the values 'call' or 'put'

   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

_D_e_t_a_i_l_s:

     The well-known closed-form solution derived by Black, Scholes and
     Merton is used for valuation. 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.

_V_a_l_u_e:

     The 'EuropeanOptionImpliedVolatility' 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

_N_o_t_e:

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

_A_u_t_h_o_r(_s):

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

_R_e_f_e_r_e_n_c_e_s:

     <URL: http://quantlib.org> for details on 'QuantLib'.

_S_e_e _A_l_s_o:

     'EuropeanOption','AmericanOption','BinaryOption'

_E_x_a_m_p_l_e_s:

     EuropeanOptionImpliedVolatility(type="call", value=11.10, underlying=100,
             strike=100, dividendYield=0.01, riskFreeRate=0.03,
             maturity=0.5, volatility=0.4)

