Hi R users,

 

I am trying to estimate the implied probability distribution. 

 

Using non overlapping data of one month call option I have estimated the
implied volatility using the GBSVolatility of fOptions. Using these
implied volatilities I have obtained delta using GBSGreeks of the same
package. 

Using the natural splines I have plotted the implied volatility and
delta.

 

I have two questions (this might be trivial but would be glad for
insight):

1) How do I extrapolate to obtain the tail?

2) How do I back out the option price? (We can use the Black- Scholes
model (GBSOption of fOptions), however my understanding is it requires
implied volatility and strike, but we have implied volatility and delta)


 

Thank you in advance for the help.

Regards,

Ravi


	[[alternative HTML version deleted]]

