NotQuiteRandom
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Hi,
I have been messing around with this paper I found online...
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=567721
The author offers a closed form approximation for implied vol and claims to cover a far larger range than those published to date.
Having implemented it I find that it usually works fine (converges with Newton R) but I am sometimes computing the sqrt of negative numbers and getting erroneous results here:
Sqr(2 * Pi) / (2 * (S + x)) * (2 * c + x - S + Sqr((2 * c + x - S) ^ 2 - 1.85 * (S + x) * (x - S) ^ 2 / (Pi * Sqr(x * S)))) / Sqr(T)
I could substitute the argument under the sqrt for zero but this is hacky to say the least.
Am I missing something or is this a flaw in the paper?
Is anyone familiar with the paper?
Thanks,
NQR
I have been messing around with this paper I found online...
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=567721
The author offers a closed form approximation for implied vol and claims to cover a far larger range than those published to date.
Having implemented it I find that it usually works fine (converges with Newton R) but I am sometimes computing the sqrt of negative numbers and getting erroneous results here:
Sqr(2 * Pi) / (2 * (S + x)) * (2 * c + x - S + Sqr((2 * c + x - S) ^ 2 - 1.85 * (S + x) * (x - S) ^ 2 / (Pi * Sqr(x * S)))) / Sqr(T)
I could substitute the argument under the sqrt for zero but this is hacky to say the least.
Am I missing something or is this a flaw in the paper?
Is anyone familiar with the paper?
Thanks,
NQR
