arXiv Open Access 2023

Tighter 'uniform bounds for Black-Scholes implied volatility' and the applications to root-finding

Jaehyuk Choi Jeonggyu Huh Nan Su

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Abstrak

Using the option delta systematically, we derive tighter lower and upper bounds of the Black-Scholes implied volatility than those in Tehranchi [SIAM J. Financ. Math. 7 (2016), 893-916]. As an application, we propose a Newton-Raphson algorithm on the log price that converges rapidly for all price ranges when using a new lower bound as an initial guess. Our new algorithm is a better alternative to the widely used naive Newton-Raphson algorithm, whose convergence is slow for extreme option prices.

Topik & Kata Kunci

q-fin.MF q-fin.CP q-fin.PR

Penulis (3)

Jaehyuk Choi

Jeonggyu Huh

Nan Su

Format Sitasi

APA MLA BibTeX

Choi, J., Huh, J., Su, N. (2023). Tighter 'uniform bounds for Black-Scholes implied volatility' and the applications to root-finding. https://arxiv.org/abs/2302.08758

Akses Cepat

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Informasi Jurnal

Tahun Terbit: 2023
Bahasa: en
Sumber Database: arXiv
Akses: Open Access ✓