Re: EquityOption impliedVol calc root not bracketed

Posted by Ferdinando M. Ametrano-3 on Feb 09, 2010; 3:19pm
URL: http://quantlib.414.s1.nabble.com/EquityOption-impliedVol-calc-root-not-bracketed-tp7791p7792.html

On Tue, Feb 9, 2010 at 3:54 AM, siegfried <[hidden email]> wrote:

>
> What am I doing: calculating European EquityOptions impliedVolatility using
> GeneralizedBlackScholesProcess
>
> Sample parameters:
> Underlying=798.0
> Warrant=2.0
> CP=Call
> Strike=800
> riskfreerate = 0.05
> dividendYield = 0.0
> maturity = 365 days;
>
> Error returned = root not bracketed: f[0.0001,4] ->
> [3.480794e+001,7.600756e+002]
>
> While I am debugging I would appreciate a quick explanation as I am sure I
> am missing something pretty obvious.

with your data the underlying's 1Y forward price is
798*(exp(0.05-0)*1)=838.91. With 0% volatility the european call is
worth 37.02, more if vol is non-null: no way to imply a volatility for
an option price less than 37.02

ciao -- Nando

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