Revisiting the Implied Volatility Calculation: Possible Pitfalls of Newton’s Method (Part 1)

In our original video on calculating the implied volatility of an option from its price, we made use of Newton’s method. This is generally a fairly robust algorithm, but can fail in certain situations. In part one of this video, we will look at situations where problems might arise with this technique of finding the root of a function.

Part 2: https://youtu.be/1UXDpPrAyl0

Original Video: https://youtu.be/Jpy3iCsijIU
IMT Options and Lack of a Root: https://youtu.be/2UJ9kFqQF-s

Github: https://github.com/kpmooney/numerical_methods_youtube/blob/master/root_finding/implied_volatility/Root%20Finding.ipynb

Tip Jar: http://paypal.me/kpmooney