Create an implied volatility calculator

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Reference no: EM131086946

Create an implied volatility calculator using Black's formula

A simplified discount factor may be used that is comprised of only one interest rate r-namely,df(0,T)=where T is the maturity of the option.
If using Excel,N (d) is the function NORMSDIST().
The forward rate for stocks can be approximated by

d = continuously compounded dividends

Remember to have two models: one with σ s as an input, and one with the option market price as an input.
For the Black formula calculator, use the following data:

For the implied volatility calculator, use the following data:

It is important to differentiate the various components of your model as outlined in Figure 1-39. Inputs and outputs will change depending on whether one is calculating a price or a volatility.

Reference no: EM131086946

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