A modified Corrado-Miller implied volatility estimator
2007
scientific article
english
- Black-Scholes formula
- Corrado-Miller estimator
- implied volatility
- surface approximation
EN The implied volatility, i.e. volatility calculated on the basis of option price is a very important parameter in financial econometrics. Usually, it is calculated from the Black-Scholes option pricing formula, but it doesn't have any analytical solution. There are many ways to find it numerically. Unfortunately, all fast estimators give non rigorous results for deep-in or deep-out-of-the-rnoney options. In this paper there are compared some estimators of implied volatility and there are estimated errors for many cases of option price, strike price and real volatility. Furthermore, to reduce error using least squares surface approximation, a new estimator basing on the Corrado-Miller estimator is constructed. There are shown some cases in which the modified Corrado-Miller estimator gives more exact results.
115 - 124
CC BY-NC-ND (attribution - noncommercial - no derivatives)
public