_fprime is not correct when computing implied volatility

mcdallas / wallstreet

Real time stock and option data.

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Open xuewei4d opened 4 years ago

xuewei4d commented 4 years ago

return self.S*sqrt(self.T)*norm.pdf(d1)*exp(-self.r*self.T)

fprime is not correct, it should be

return self.S*sqrt(self.T)*norm.pdf(d1)*exp(-self.q*self.T)

mcdallas commented 4 years ago

hey @xuewei4d could you provide a source for this formula? From a quick search online looks like the current implementation is correct source

xuewei4d commented 4 years ago

imo, to compute iv using newton method, fprime is just vega. So according to the wikipedia, it should have exp(-q * t)

foobash commented 3 years ago

Which one is right?