% Implied Volatility Calculator % Daijun Xu % Project 3 %% % The function will estimate the market implied volatility of put and call % options based on Black Scholers model. I got CL and MSFT option data from % Yahoo!Finance for vectorization test and plot. And you can also use your % own data(as scalars) to calculate. %% function []=IV_calculator()

%% Set the Black Scholers methods to calculate options price d1=@(S,K,r,vol,T)(log(S/K)+(r+vol^2/2)T)/(volsqrt(T)); d2=@(S,K,r,vol,T)(log(S/K)+(r-vol^2/2)T)/(volsqrt(T)); bscallpx=@(S,K,r,vol,T)Scdf('norm',d1,0,1)-Kexp(-rT)cdf('norm',d2,0,1); bsputpx=@(S,K,r,vol,T)Kexp(-rT)cdf('norm',-d2,0,1)-Scdf('norm',-d1,0,1); bsvega=@(S,K,r,vol,T)Spdf('norm',d1,0,1)sqrt(T); quit=0; % Default value of quitting the program is 0
while(quit==0) flag1=input('Do you want use included test-data(1) or yours(2)? '); %% Get parameters from user and check the validity of parameters if flag1==2 while(quit==0)

        flag2=input('Please choose the type of option \n (call is 1, put is 2):  ');

        T=input('Please input Tenor(in year) of the option:  ');
        K=input('Please input Strike price(in US dollar) of the option:  ');
        r=input('Please input riskless rate(in decimal digits) in the market:  ');
        S=input('Please input current price(in US dollar) of the underlying stock:  ');
        vol_int=input('Please input a guess for newton methods:  ');
            if T>0&&K>0&&r>-1&&r<1&&S>0
                quit=2;
             fprintf('The result of bisection methods is: \n')
             bisection_iv(optpx,S,K,r,T,flag2)
             fprintf('The result of newton methods is: \n')
             newton_iv(optpx,S,K,r,T,vol_int,flag2)
            else
                quit=input('Parameters Error. To quit, press 1. To continue inputing parameters,press 0 \n');
            end   
        end
        if quit==1
            break
        end

    else

%% Import test data

CLC=xlsread('CL.xlsx','CallOptions','B2:E18');
CLP=xlsread('CL.xlsx','PutOptions','B2:E26');
MSFTC=xlsread('MSFT.xlsx','CallOptions','B2:E15');
MSFTP=xlsread('MSFT.xlsx','PutOptions','B2:E22');

%% Using test data, plot and compare
figure % Call option of CL % Bisection methods BCLcall_bid=bisection_iv(CLC(:,3),CLC(:,1),CLC(:,2),0.012,3/12,1); % Call option for CL, bid price implied volatility in bisection methods subplot(2,1,1);plot(BCLcall_bid,CLC(:,2)) title1=title('Besection methods implied volatility') hold on BCLcall_ask=bisection_iv(CLC(:,4),CLC(:,1),CLC(:,2),0.012,3/12,1); % Call option for CL, ask price implied volatility in bisection methods plot(BCLcall_ask,CLC(:,2)) legend1=legend('MIV of bid','MIV of ask') hold off

        % Newton methods
        NCLcall_bid=newton_iv(CLC(:,3),CLC(:,1),CLC(:,2),0.012,3/12,0.5,1);  % Call option for CL, bid price implied volatility in newton methods
        subplot(2,1,2);plot(NCLcall_bid,CLC(:,2))  
        title2=title('Newton methods implied volatility')
        hold on
        NCLcall_ask=newton_iv(CLC(:,4),CLC(:,1),CLC(:,2),0.012,3/12,0.5,1);  % Call option for CL, ask price implied volatility in newton methods
        plot(NCLcall_ask,CLC(:,2))
        legend2=legend('MIV of bid','MIV of ask')
        hold off

        figure
        % Put option of CL
        % Bisection methods
        BCLput_bid=bisection_iv(CLP(:,3),CLP(:,1),CLP(:,2),0.012,3/12,1);  % Put option for CL, bid price implied volatility in bisection methods
        subplot(2,1,1);plot(BCLput_bid,CLC(:,2))  
        title3=title('Besection methods implied volatility')
        hold on
        BCLput_ask=bisection_iv(CLC(:,4),CLC(:,1),CLC(:,2),0.012,3/12,1);  % Put option for CL, ask price implied volatility in bisection methods
        plot(BCLput_ask,CLC(:,2)) 
        legend3=legend('MIV of bid','MIV of ask')
        hold off               

        % Newton methods
        NCLcall_bid=newton_iv(CLC(:,3),CLC(:,1),CLC(:,2),0.012,3/12,0.5,1);  % Call option for CL, bid price implied volatility in newton methods
        subplot(2,1,2);plot(NCLcall_bid,CLC(:,2))  
        title4=title('Newton methods implied volatility')
        hold on
        NCLcall_ask=newton_iv(CLC(:,4),CLC(:,1),CLC(:,2),0.012,3/12,0.5,1); % Call option for CL, ask price implied volatility in newton methods
        plot(NCLcall_ask,CLC(:,2))
        legend4=legend('MIV of bid','MIV of ask')
        hold off

        figure
        % Call option of MSFT
        % Bisection methods
        BMSFTcall_bid=bisection_iv(MSFTC(:,3),MSFTC(:,1),MSFTC(:,2),0.012,3/12,1);  % Call option for MSFT, bid price implied volatility in bisection methods
        subplot(2,1,1);plot(BMSFTcall_bid,MSFTC(:,2)) 
        title5=title('Besection methods implied volatility') 
        hold on
        BMSFTcall_ask=bisection_iv(MSFTC(:,4),MSFTC(:,1),MSFTC(:,2),0.012,3/12,1);  % Call option for MSFT, ask price implied volatility in bisection methods
        plot(BMSFTcall_ask,MSFTC(:,2)) 
        legend5=legend('MIV of bid','MIV of ask')
        hold off   

        % Newton methods
        NMSFTcall_bid=newton_iv(MSFTC(:,3),MSFTC(:,1),MSFTC(:,2),0.012,3/12,0.5,1);  % Call option for MSFT, bid price implied volatility in newton methods
        subplot(2,1,2);plot(NMSFTcall_bid,MSFTC(:,2))  
        title6=title('Newton methods implied volatility') 
        hold on
        NMSFTcall_ask=newton_iv(MSFTC(:,4),MSFTC(:,1),MSFTC(:,2),0.012,3/12,0.5,1);  % Call option for MSFT, ask price implied volatility in newton methods
        plot(NMSFTcall_ask,MSFTC(:,2))
        legend6=legend('MIV of bid','MIV of ask')
        hold off

        figure
        % Put option of MSFT
        % Bisection methods
        BMSFTput_bid=bisection_iv(MSFTP(:,3),MSFTP(:,1),MSFTP(:,2),0.012,3/12,1);  % Put option for MSFT, bid price implied volatility in bisection methods
        subplot(2,1,1);plot(BMSFTput_bid,MSFTC(:,2))  
        title7=title('Besection methods implied volatility')
        hold on
        BMSFTput_ask=bisection_iv(MSFTC(:,4),MSFTC(:,1),MSFTC(:,2),0.012,3/12,1);  % Put option for MSFT, ask price implied volatility in bisection methods
        plot(BMSFTput_ask,MSFTC(:,2)) 
        legend7=legend('MIV of bid','MIV of ask')
        hold off               

        % Newton methods
        NMSFTcall_bid=newton_iv(MSFTC(:,3),MSFTC(:,1),MSFTC(:,2),0.012,3/12,0.5,1);  % Call option for MSFT, bid price implied volatility in newton methods
        subplot(2,1,2);plot(NMSFTcall_bid,MSFTC(:,2))  
        title8=title('Newton methods implied volatility')
        hold on
        NMSFTcall_ask=newton_iv(MSFTC(:,4),MSFTC(:,1),MSFTC(:,2),0.012,3/12,0.5,1);  % Call option for MSFT, ask price implied volatility in newton methods
        plot(NMSFTcall_ask,MSFTC(:,2))
        legend8=legend('MIV of bid','MIV of ask')
        hold off




        %% To ask if the user want to compute other options
            quit=input('Do you want compute another option? To continue, press 0. To quit,press 1 \n');
    end
end

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