MATLAB: Implied volatility with multiple discrete dividends

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How can I calculate implied (Black) volatility in MATLAB given: spot/forward price, multiple DISCRETE dividends, EU and US type option. In case of US, there is "impvbyrgw()", however, this only works for one dividend.

Is there any function that can handle multiple discrete dividends?

Best Answer

This can be done by using some of our built-in option pricing functionality along with calling "fzero". Attached is an example that uses "optstockbyfd" along with "fzero" to compute the implied volatility for an option with American-style exercise and multiple discrete dividends.

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MATLAB: What is the difference between IMPVBYBLS and BLSIMPV, and how to I determine the Black-Scholes implied volatility using these functions

Both IMPVBYBLS and BLSIMPV use the Black-Scholes model to compute the implied volatility for a given option price. However, one of the main differences between the two functions is that IMPVBYBLS allows specifying cash dividends as well as continuous dividend yields, while BLSIMPV only allows continuous dividend yields.

If you specify continuous dividend yields for both IMPVBYBLS and BLSIMPV, they produce the same results:

Strike = 29;
AssetPrice = 30;
Sigma = .25;
Rates = 0.05;
Settle = datenum('01-Jan-2008');
Maturity = datenum('01-May-2008');
RateSpec = intenvset('ValuationDate', Settle, 'StartDates', Settle, ...
'EndDates',Maturity, 'Rates', Rates, 'Compounding', -1,'Basis',1);
DividendType = {'continuous';'continuous'};
DividendAmounts = [0.05; 0.045];
ExDividendDates = {NaN;NaN};
StockSpec = stockspec(Sigma, AssetPrice, DividendType, DividendAmounts);
OptSpec = {'call'; 'put'};
OptionPrice = optstockbybls(RateSpec, StockSpec, Settle, Maturity, OptSpec, Strike);
ImpvVol1 = impvbybls(RateSpec, StockSpec, Settle, Maturity, OptSpec, ...
Strike, OptionPrice)
ImpvVol2 = blsimpv(AssetPrice, Strike, Rates, ...
yearfrac(Settle,Maturity,1), OptionPrice, 'Class', OptSpec,'Yield',DividendAmounts)
ImpvVol1 =
0.250000000000000
0.250000000000000
ImpvVol2 =
0.250000000000000
0.250000000000000

MATLAB: How to add column values of different tables based on dates column

If you have R2016b or later, either the retime (link) or synchronize (link) function will probably work.

Best Answer

Related Solutions

MATLAB: What is the difference between IMPVBYBLS and BLSIMPV, and how to I determine the Black-Scholes implied volatility using these functions

MATLAB: How to add column values of different tables based on dates column

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