Determining Accuracy of Implied Volatility Computation Using Verification Theorem
In the Black-Scholes option Pricing formulas, one parameter that cannot directly observed is volatility of stock price. If actual market data of the prive ????? are known, than volatility (????) can be viewed as unknow. The volatility (????) determined in this way is called implied volatility and is...
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| Format: | Theses |
| Language: | Indonesia |
| Online Access: | https://digilib.itb.ac.id/gdl/view/42518 |
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| Institution: | Institut Teknologi Bandung |
| Language: | Indonesia |
| Summary: | In the Black-Scholes option Pricing formulas, one parameter that cannot directly observed is volatility of stock price. If actual market data of the prive ????? are known, than volatility (????) can be viewed as unknow. The volatility (????) determined in this way is called implied volatility and is the root of equation ????(????)=????(????)??????. In this work, to find the root will be used Newton’s Method and Spiral Algorithm. In the Newton’s Method, we will be used ?????=?2|????????????(????????)+????(?????????)?????????| for starting point and in the Spiral Algorithm, we will search a point that give minimum value of ????(????) from 2.000 random points. The value from each method will be determined accuracy using Verification Theorem. From this research, known that Newton’s Method is more accurate than Spiral Algorithm. |
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