Implied volatility

Posted by assil.d on Jan 20, 2015; 9:07pm
URL: http://quantlib.414.s1.nabble.com/Implied-volatility-tp16186.html

Dir friends, hello. 

I am Dini i am an econometrics student and i am encountering some difficulties to program with R. I need your help please. I think that it will be relatively easy for you.

The first question related to my homework is to program the Black-scholes pricer with R, i have done it: My R code in the jointed txt file.

The second is much more complicated:

"Build an iterative algorithm to compute the implied volatility surface from those prices (an implied vol surface is a matrix of implied volatility for different maturity in rows and different strikes in columns). You can use

T = [1/12 ;0:25; 0:5; 1] and K = [0.75So; 0.8So; 0.9So; So; 1.1So; 1.2So; 1.25So]   where So is the initial price of the stock."

I understood that, In order to derive an implied volatility surface, we will compute the BS price for 4 different maturities, and for each one we will vary the strike price K that will take 7 different values, all proportional to So  (the initial price of the stock). Then the algorithm has to iterate the operation for all the Ks, 4 different times doing it row by row. 
And then proceed to the graphical representation.

Could you please have any R algorithm programing to suggest me? Thank you  

Note: i know that some packages exist, but we have to make ourself the programing.

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