blsimpv (Financial Toolbox)

Black-Scholes implied volatility.

Syntax

v = blsimpv(so, x, r, t, call, maxiter)
v = blsimpv(so, x, r, t, call)

Arguments

so: Current asset price.

x: Exercise price.

r: Risk-free interest rate. Enter as a decimal fraction.

t: Time to maturity in years.

call: Call option value.

maxiter: Maximum number of iterations used in solving for v using Newton's method. Default = 50.

Description

v = blsimpv(so, x, r, t, call, maxiter)

returns the implied volatility v of an underlying asset, using Newton's method.

Note: This function uses normcdf and normpdf, the normal cumulative distribution and normal probability density functions in the Statistics Toolbox.

Example

An asset has a current price of $100, an exercise price of $95, the risk free interest rate is 7.5%, the time to maturity of the option is 0.25 years, and the call option has a value of $10.00.

v = blsimpv(100, 95, 0.075, 0.25, 10)
v =
    0.3130 (or 31.3%)