Examples of org.jquantlib.instruments.VanillaOption.impliedVolatility()

org.jquantlib.instruments.VanillaOption.impliedVolatility()

Currently, this method returns the Black-Scholes implied volatility using analytic formulas for European options and a finite-difference method for American and Bermudan options. It will give inconsistent results if the pricing was performed with any other methods (such as jump-diffusion models.)

Options with a gamma that changes sign (e.g., binary options) have values that are not monotonic in the volatility. In these cases, the calculation can fail and the result (if any) is almost meaningless. Another possible source of failure is to have a target value that is not attainable with any volatility, e.g., a target value lower than the intrinsic value in the case of American options.

                                            // flat price vs vol --- pointless (and
                                            // numerically unstable) to solve
                                            continue;
                                        }


                                        implVol = option.impliedVolatility(value, process, tolerance, maxEvaluations);


                                        if (Math.abs(implVol-v) > tolerance) {
                                            // the difference might not matter
                                            vol.setValue(implVol);
                                            final double value2 = option.NPV();

                                            // flat price vs vol --- pointless (and
                                            // numerically unstable) to solve
                                            continue;
                                        }


                                        implVol = option.impliedVolatility(value, process, tolerance, maxEvaluations);


                                        if (Math.abs(implVol-v) > tolerance) {
                                            // the difference might not matter
                                            vol.setValue(implVol);
                                            final double value2 = option.NPV();

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