scholarly journals PERBANDINGAN KEEFISIENAN METODE NEWTON-RAPHSON, METODE SECANT, DAN METODE BISECTION DALAM MENGESTIMASI IMPLIED VOLATILITIES SAHAM

2016 ◽  
Vol 5 (1) ◽  
pp. 1
Author(s):  
IDA AYU EGA RAHAYUNI ◽  
KOMANG DHARMAWAN ◽  
LUH PUTU IDA HARINI

Black-Scholes model suggests that volatility is constant or fixed during the life time of the option certainly known. However, this does not fit with what happen in the real market. Therefore, the volatility has to be estimated. Implied Volatility is the etimated volatility from a market mechanism that is considered as a reasonable way to assess the volatility's value. This study was aimed to compare the Newton-Raphson, Secant, and Bisection method, in estimating the stock volatility value of PT Telkom Indonesia Tbk (TLK). It found that the three methods have the same Implied Volatilities, where Newton-Raphson method gained roots more rapidly than the two others, and it has the smallest relative error greater than Secant and Bisection methods.

2018 ◽  
Vol 10 (6) ◽  
pp. 108
Author(s):  
Yao Elikem Ayekple ◽  
Charles Kofi Tetteh ◽  
Prince Kwaku Fefemwole

Using market covered European call option prices, the Independence Metropolis-Hastings Sampler algorithm for estimating Implied volatility in option pricing was proposed. This algorithm has an acceptance criteria which facilitate accurate approximation of this volatility from an independent path in the Black Scholes Model, from a set of finite data observation from the stock market. Assuming the underlying asset indeed follow the geometric brownian motion, inverted version of the Black Scholes model was used to approximate this Implied Volatility which was not directly seen in the real market: for which the BS model assumes the volatility to be a constant. Moreover, it is demonstrated that, the Implied Volatility from the options market tends to overstate or understate the actual expectation of the market. In addition, a 3-month market Covered European call option data, from 30 different stock companies was acquired from Optionistic.Com, which was used to estimate the Implied volatility. This accurately approximate the actual expectation of the market with low standard errors ranging between 0.0035 to 0.0275.


2021 ◽  
Vol 1 (4) ◽  
pp. 313-326
Author(s):  
Xiaozheng Lin ◽  
◽  
Meiqing Wang ◽  
Choi-Hong Lai ◽  

<abstract><p>The Black-Scholes option pricing model (B-S model) generally requires the assumption that the volatility of the underlying asset be a piecewise constant. However, empirical analysis shows that there are discrepancies between the option prices obtained from the B-S model and the market prices. Most current modifications to the B-S model rely on modelling the implied volatility or interest rate. In contrast to the existing modifications to the Black-Scholes model, this paper proposes the concept of including a modification term to the B-S model itself. Using the actual discrepancies of the results of the Black-Scholes model and the market prices, the modification term related to the implied volatility is derived. Experimental results show that the modified model produces a better option pricing results when compare to market data.</p></abstract>


2021 ◽  
Vol 23 (07) ◽  
pp. 858-866
Author(s):  
Gauri Thakur ◽  
◽  
J.K. Saini ◽  

In numerical analysis, methods for finding roots play a pivotal role in the field of many real and practical applications. The efficiency of numerical methods depends upon the convergence rate (how fast the particular method converges). The objective of this study is to compare the Bisection method, Newton-Raphson method, and False Position Method with their limitations and also analyze them to know which of them is more preferred. Limitations of these methods have allowed presenting the latest research in the area of iterative processes for solving non-linear equations. This paper analyzes the field of iterative methods which are developed in recent years with their future scope.


Author(s):  
Tomas Björk

The chapter starts with a detailed discussion of the bank account in discrete and continuous time. The Black–Scholes model is then introduced, and using the principle of no arbitrage we study the problem of pricing an arbitrary financial derivative within this model. Using the classical delta hedging approach we derive the Black–Scholes PDE for the pricing problem and using Feynman–Kač we also derive the corresponding risk neutral valuation formula and discuss the connection to martingale measures. Some concrete examples are studied in detail and the Black–Scholes formula is derived. We also discuss forward and futures contracts, and we derive the Black-76 futures option formula. We finally discuss the concepts and roles of historic and implied volatility.


1998 ◽  
Vol 01 (04) ◽  
pp. 487-505 ◽  
Author(s):  
Stefano Herzel

This paper proposes a simple modification of the Black–Scholes model by assuming that the volatility of the stock may jump at a random time τ from a value σa to a value σb. It shows that, if the market price of volatility risk is unknown, but constant, all contingent claims can be valued from the actual price C0, of some arbitrarily chosen "basis" option. Closed form solutions for the prices of European options as well as explicit formulas for vega and delta hedging are given. All such solutions only depend on σa, σb and C0. The prices generated by the model produce a "smile"-shaped curve of the implied volatility.


Author(s):  
Qani Yalda

The main purpose of this paper is to obtain the real roots of an expression using the Numerical method, bisection method, Newton's method and secant method. Root analysis is calculated using specific, precise starting points and numerical methods and is represented by Maple. In this research, we used Maple software to analyze the roots of nonlinear equations by special methods, and by showing geometric diagrams, we examined the relevant examples. In this process, the Newton-Raphson method, the algorithm for root access, is fully illustrated by Maple. Also, the secant method and the bisection method were demonstrated by Maple by solving examples and drawing graphs related to each method.


2019 ◽  
Vol 4 (2) ◽  
pp. 56-69
Author(s):  
Richard Umbu Datangeji ◽  
Ali Warsito ◽  
Hadi Imam Sutaji ◽  
Laura A. S. Lapono

Abstrak  Telah dilakukan penelitian tentang distribusi intensitas cahaya pada fenomena difraksi celah tunggal dengan tujuan menerapkan metode Bagi Dua dan metode Newton Raphson untuk memperoleh solusi jarak antara dua titik intensitas dalam fenomena difraksi celah tunggal, menetukan jarak antara dua intensitas pada pita terang, memperoleh grafik distribusi intensitas cahaya terhadap jarak pada kasus difraksi cahaya Franhoufer celah tunggal, serta membandingkan kekonvergenan metode Bagi Dua dan metode Newton Raphson. Solusi jarak antara dua intensitas pada pita terang pada kasus difraksi cahaya Franhoufer celah tunggal diperoleh dengan mencari akar-akar persamaan intensitas cahayanya. Hasil penelitian menunjukan jarak yang semakin besar ketika intensitasnya makin kecil. Ada tiga puncak intensitas, yang pertama puncak untuk intensitas maksimum pada terang pusat yang berada pada jarak 0 cm dan dua puncak untuk terang pertama setelah terang pusat yang mana intensitasnya tinggal 0.05I0 dan berada pada jarak 0.154875 cm sebelah kiri dan sebelah kanan dari intensitas maksimum. Grafik antara jarak dengan perbandingan intensitas terhadap terang maksimum berbentuk sinusoidal, terdapat tiga puncak intensitas. Puncak pertama menunjukan intensitas maksimum yang terdapat pada pita terang pusat dan dua puncak dengan intensitas 0.05I0  yang berada pita terang pertama. Pada kasus ini diperoleh hasil bahwa metode Newton Raphson lebih cepat konvergen dari metode Bagi Dua karena hanya memerlukan 4 iterasi untuk memperoleh solusi, sedangkan metode Bagi Dua membutuhkan 20 iterasi. Metode Newton Raphson juga memiliki nilai error pendekatan lebih kecil dari metode Bagi Dua yaitu 6.43929 x 10-13 sampai 7.52642 x 10-7 sedangkan metode Bagi Dua 1.90735 x 10-6. Abstract  Research on the distribution of light intensity in the phenomenon of single slit diffraction has been carried out with the aim of applying the Bisection method and the Newton Raphson method to obtain a solution between two points in a single slit diffraction phenomenon, determining the distance between two point of intensity in the bright band, obtaining a graph of the light intensity distribution to distance in the case of Franhoufer single slit light diffraction, and comparing the speed of convergence of the Bisection method and the Newton Raphson method. The solution of the distance between two intensities in the bright band in the case of Franhoufer light diffraction in a single slit obtained by looking for the roots of the light intensity equation. The results of the study show that the greater the distance when then intensity gets smaller. There are three peak intensities, the first peak for the highest intensity in the central bright band which is located at a distance of 0 cm and two peaks in the first bright with the intensity is 0.05I0 and is 0.154875 cm left and right of the maximum intensity. The graph between the distance and intensity ratio is sinusoidal, which is three peak intensities. The first peak shows the highest intensity in the central bright band and the two peaks with the intensity of 0.05I0 which is the first bright band. In this case the results of the Newton Raphson method are converged faster than the method of Bisection because it only requires 4 iterations to obtain a solution, while the Bisection method requires 20 iterations. The Newton Raphson method also has a smaller error value than the Bisection method, which is 6.43929 x 10-13 to 7.52642 x 10-6 when the Bisection method is 1.90735 x 10-6.


2017 ◽  
Vol 11 ◽  
pp. 2789-2797 ◽  
Author(s):  
Jeongwon Kim ◽  
Taehoon Noh ◽  
Wonjun Oh ◽  
Seung Park ◽  
Nahmwoo Hahm

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