Black-Scholes Implied Volatility

The Black-Scholes Implied Volatility calculation lets you calculate the volatility that is implied by an option's market price.

For more info about this topic, please visit the Wikipedia page on the subject.

Input

• risk free rate

• duration in years

• underlying stock price

• annual dividend yield

• option strike price

• call or put option price

Tip: the duration in years between any two given days can easily be calculated using FinKit's Year Fraction calculation.

Result

• implied volatility

Examples

•

Stock from the ABC company has a current price of $25 and a strike price of $28. The risk free rate is at 10 %. The annual dividend is 2 %. What is the implied volatility of a 3-month call option wich is priced at $0.65? Input Risk free rate: 10 %   Duration in years]: 0.25   Underlying stock price : 25   Annual dividend yield 2 %   Option strike price: 28   Call option price: 0.65       Result Implied volatility: 30.3507 Answer: 30.3507 %.

 

Related topic

Black-Scholes Option Pricing