Implied Volatility (Newton-Raphson)

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Inverts the Black-Scholes price to find the volatility consistent with a market option price.

Details

• category: Derivatives
• formula: Find σ such that BS(S, K, T, r, σ) = MarketPrice
• formula latex: \sigma : \text{BS}(S, K, T, r, \sigma) = \text{Market Price}
• related terms: implied-volatility, vega, vol-surface, black-scholes

Formula

Find σ such that BS(S, K, T, r, σ) = MarketPrice