Implied Volatility Calculator
Use this calculator to calculate implied volatility of an option,
i.e.,
volatility implied by current market price of the option. Black Scholes model
assumes that option price can be determined by plugging spot price, exercise
price, time to expiry, volatility of the underlying and risk free interest rate
into Black Scholes formula. However, the observed option prices in practice do
not always match with the theoretical prices computed using BS formula. By using
market price of the option as a known variable in the BS formula, underlying
volatility can be back calculated and the volatility calculated this way is
known as implied volatility. Implied volatility represents market expectation of
the volatility and it is often used to check if an option is under or over
priced.
