Does anyone know if I can use QuantLib to interpolate or
extrapolate
from given volatilities to a target volatility? I want to
price a European
Option using a volatility derived from Listed American
Options. To do
this I’m using QuantLib to back-out the implied
volatilities from the
4 “nearest” listed options to the target Date
and Strike of the European
option I want to price (using DividendVanillaOption).
Once I have those 4 volatilities I’m manually
interpolating from them to
a reasonable volatility to price my target European Option.
This seems
to work ok, but now I need to also price European Options
that are
way beyond data available on the listed market (36 month “leaps”).
To do this I’ve been told I can straight-line
extrapolation from the
latest data available to the target volatility.
Anyone know if QuantLib can help me out with this
extrapolation?
Or anyone know any easy straight-line extrapolation
algorithms?
Thanks for any pointers,
Ferghil O’Rourke
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