Financial Toolbox

blsimpv

Black-Scholes implied volatility

Syntax

• Volatility = blsimpv(Price, Strike, Rate, Time, Call, MaxIterations, 
  DividendRate, Tolerance)
  

Arguments

Price	Current asset price.
Strike	Exercise price.
Rate	Risk-free interest rate. Enter as a decimal fraction.
Time	Time to maturity.
Call	Call option value.
MaxIterations	(Optional) Maximum number of iterations used in solving for Volatility. Default = 50.
DividendRate	(Optional) Dividend rate for dividend-paying securities. Enter as a decimal fraction. Default = 0.
Tolerance	(Optional) Tolerance (+/-) for convergence. Default = 1e-6.

Description

Volatility = blsimpv(Price, Strike, Rate, Time, Call, MaxIterations, DividendRate, Tolerance) returns the implied volatility of an underlying asset.

Rate and Time must be consistent, e.g., if Rate is an annualized rate, Time must be expressed in years.

Examples

An asset has a current price of $100, an exercise price of $95, the risk free interest rate is 7.5%, the time to maturity of the option is 0.25 years, and the call option has a value of $10.00.

• Vol = blsimpv(100, 95, 0.075, 0.25, 10)
  
  Vol =
      0.3130 (or 31.3%)
  

See Also

blsprice

References

Bodie, Kane, and Marcus, Investments, page 681.

Chriss, Black-Scholes and Beyond: Option Pricing Models, Chapters 4 and 8.

blsgamma

blslambda