Adaptive Gradient Descent Methods for Computing Implied Volatility

Yixiao Lu; Yihong Wang; Tinggan Yang

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arXiv · 2108.07035

Adaptive Gradient Descent Methods for Computing Implied Volatility

Yixiao Lu·Yihong Wang·Tinggan Yang

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Abstract

In this paper, a new numerical method based on adaptive gradient descent optimizers is provided for computing the implied volatility from the Black-Scholes (B-S) option pricing model. It is shown that the new method is more accurate than the close form approximation. Compared with the Newton-Raphson method, the new method obtains a reliable rate of convergence and tends to be less sensitive to the beginning point.

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BibTeX RIS

Yixiao Lu, Yihong Wang, Tinggan Yang. 2021-08-16. Adaptive Gradient Descent Methods for Computing Implied Volatility. https://arxiv.org/abs/2108.07035

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