[R-SIG-Finance] GBSVolatility not working on vectors?

[Joe W. Byers]

On 09/25/2014 04:47 AM, Joachim Breit wrote:
> Hi,
>
> I am struggling with the GBSVolatility function. I have a huge dataframe
> 'd' with options market data and want to add a column with the implied
> volatility computed from the ask price.
>
> When invoking GBSVolatility with a single line of the dataframe
> everything works fine. But when feeding the columns of the dataframe
> into GBSVolatility I get an error message.
>
> To tackle the issue I took a mini-dataframe 'dtemp' with only two rows
> (arbitrary subset of the original d)
>
> ## mini-dataframe ########################################
>  > dtemp <- d[515:516,]
>  > dtemp
>       strike cp   ask   bid     c ntd      rb   iva
> 1081     50  c 16.17 15.37 65.79  32 0.00384 1e+09
> 1083     51  c 15.17 14.37 65.79  32 0.00384 1e+09
>
> ## invoking with the entire mini-dataframe ####################
>  > dtemp$iva  <- GBSVolatility(price = dtemp$ask, TypeFlag = dtemp$cp,
> S = dtemp$c , X = dtemp$strike, Time = dtemp$ntd / 253.8,
> r = pmax(dtemp$rb, 0), b = pmax(dtemp$rb, 0))
> Fehler in uniroot(.fGBSVolatility, interval = c(-10, 10), price = price,  :
>    ungültiger Funktionswert in 'zeroin'
> Zusätzlich: Warnmeldungen:
> 1: In if (is.na(f.lower)) stop("f.lower = f(lower) is NA") :
>    Bedingung hat Länge > 1 und nur das erste Element wird benutzt
> 2: In if (is.na(f.upper)) stop("f.upper = f(upper) is NA") :
>    Bedingung hat Länge > 1 und nur das erste Element wird benutzt
> 3: In if (f.lower * f.upper > 0) stop("f() values at end points not of
> opposite sign") :
>    Bedingung hat Länge > 1 und nur das erste Element wird benutzt
>
>
> ## invoking with the first row of the mini-dataframe ###############
>  > dtemp <- d[515:515,]
>  > dtemp$iva  <- GBSVolatility(price = dtemp$ask, TypeFlag = dtemp$cp,
> S = dtemp$c , X = dtemp$strike, Time = dtemp$ntd / 253.8,
> r = pmax(dtemp$rb, 0), b = pmax(dtemp$rb, 0))
>  > dtemp
>       strike cp   ask   bid     c ntd      rb       iva
> 1081     50  c 16.17 15.37 65.79  32 0.00384 0.5340467
>
> ## invoking with the 2nd row of the mini-dataframe ###############
>  > dtemp <- d[516:516,]
>  > dtemp$iva  <- GBSVolatility(price = dtemp$ask, TypeFlag = dtemp$cp, S
> = dtemp$c , X = dtemp$strike, Time = dtemp$ntd / 253.8, r =
> pmax(dtemp$rb, 0), b = pmax(dtemp$rb, 0))
>  > dtemp
>       strike cp   ask   bid     c ntd      rb       iva
> 1083     51  c 15.17 14.37 65.79  32 0.00384 0.5030617
>
>
> Can somebody please help? I am going crazy...
>
> Joachim
>

Joachim


Try something like this.  I have this in an automated task calculating 
Energy IV's every day.  res is a dataframe of option characteristics.  I 
use a Try statement for basic error trap.  This is rough but works.

   # need to error trap options that will not return a valid Vol.  This 
occurs at
   # option  strikes close to zero and short time to expiraton.
   done = F;
   idx = as.logical(matrix(1, nrow=dim(res)[1],ncol=1)) ;
   res$IV = NaN; #initialize all IV's to NaNs
   while( !done){
     try({
       cat('impliedVolatilityCurve: calculator trying\n') 

       res$IV[idx] = mapply(GBSVolatility,price=res$Settle[idx], 
TypeFlag=lowerCase(res$Type[idx]),
          S=res$Underlying[idx], X=res$Strike[idx], 
Time=as.numeric(res$Texp[idx]), r=res$RFRate[idx],
          b=0, tol=10e-3, maxiter=300, USE.NAMES=T);
       done = T;
       cat('impliedVolatilityCurve: calculator completed try\n') 

       })#, silent=T)
     if (!done){ idx = res$Strike>1.00; }

   }

This works for what I needed.  I set the tolerance to 10e-3 because 
prices are quotes in 3 decimal places and this is an estimated parameter 
so it is close enough.  The last if(!done) traps strikes less than a 
1.00 for energy commodities.  This will need to be modified for other 
option markets.

Good Luck
Joe