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A formula to compute implied volatility, with error estimate. (English) Zbl 1176.91154

Summary: We derive a simple formula to compute implied volatility approximately, and give an estimate of its relative error, in the framework developed by Black-Scholes. In particular, our error estimate ensures that the relative error of our formula is converging to 0 under certain conditions.

MSC:

91G20 Derivative securities (option pricing, hedging, etc.)
91G80 Financial applications of other theories
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