Fast Generation of Implied Volatility Surface for Exchange-Traded Stock Options
نویسنده
چکیده
We present an algorithm and its software implementation that computes implied volatilities for exchangetraded stock options. The LR (Leisen-Reimer) binomial tree is used for the underlying option pricing, which is adjusted for dollar cash dividends. The Brent’s method is used as the root-finding procedure. The option pricing procedure that is at the core of the root-finding is optimised to maximise the performance. Tests were made on call and put options traded on the stocks of Microsoft Corporation and Apple Inc.. In 0.046 and 0.226 seconds, respectively, the implemented generator finished computing the implied volatilities for 154 Microsoft and 823 Apple call options.
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