implied_jump_process_volatility {ragtop} | R Documentation |
Implied volatility of any instrument
Description
Use the grid solver to generate instrument prices via find_present_value
and run them
through a bisective root search method until a constant volatility matching the provided
instrument price has been found.
Usage
implied_jump_process_volatility(
instrument_price,
instrument,
...,
starting_volatility_estimate = 0.85,
relative_tolerance = 0.005,
max.iter = 100,
max_vola = 4
)
Arguments
instrument_price |
Target price for root finder |
instrument |
Instrument to search for the target price on, passed as
the sole instrument to |
... |
Additional arguments to be passed on to |
starting_volatility_estimate |
Bisection method original guess |
relative_tolerance |
Relative tolerance in instrument price defining the root-finder halting condition |
max.iter |
Maximum number of root-finder iterations allowed |
max_vola |
Maximum volatility to try |
Details
Unlike american_implied_volatility
, this routine allows for any legal
term structures and equity-linked default intensities. For that reason, it eschews
the control variate tricks that make american_implied_volatility
so much faster.
Note that equity-linked default intensities can result in instrument prices that are not monotonic in volatility. This bisective root finder will find a solution but not necessarily any particular one.
Value
A list of present values, with the same names as instruments
See Also
find_present_value
for the underlying
pricing algorithm, implied_volatility_with_term_struct
for European options
without equity dependence of default intensity, american_implied_volatility
for the same on American options
Other Implied Volatilities:
american_implied_volatility()
,
equivalent_bs_vola_to_jump()
,
equivalent_jump_vola_to_bs()
,
fit_variance_cumulation()
,
implied_volatilities_with_rates_struct()
,
implied_volatilities()
,
implied_volatility_with_term_struct()
,
implied_volatility()
Other Equity Dependent Default Intensity:
find_present_value()
,
fit_to_option_market_df()
,
fit_variance_cumulation()
,
form_present_value_grid()
Examples
implied_jump_process_volatility(
25, AmericanOption(maturity=1.1, strike=100, callput=-1),
S0=100, num_time_steps=50, relative_tolerance=1.e-3)