Category: Options

Implied Volatility Calculator

The Black-Scholes model can be used to estimate implied volatility. Implied Volatility can be estimated using  spot price, strike price, asset price, risk-free rate, time to maturity, and dividend yield. To achieve this, given an actual option value, you have to iterate to find the volatility solution. There are various techniques available; however we will use […]

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Simulating Call Option Variance Reduction

A common shortcoming of standard Monte Carlo Simulation is the required computing resources and time. MC simulation typically has an error variance of σ2/n.To achieve a desired accuracy in a crude MC simulation, the sampling is conducted with a larger value of n. But this approach decreases the efficiency of the simulation. In this post, I will explore few […]

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Binomial Option Pricing Excel

A Primer on Binomial Option Pricing A binomial tree represents the different possible paths a stock price can follow over time.To define a binomial tree model, a basic period length is established (such as 1 month). If the price of a stock is known at the beginning of a period, the price at the beginning of […]

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