A Generalized Simple Formula to Compute the Implied Volatility

Don M Chance

The Financial Review, 1996, vol. 31, issue 4, 859-67

Abstract: This paper provides a direct method of obtaining an accurate estimate of the implied volatility of a call option. It adds a quadratic adjustment term to an already-known formula for at-the-money calls, previously developed by Brenner and Subrahmanyam. The adjusted formula is quite accurate for options no more than 20 percent in- or out-of-the-money and is simple to program and compute. Copyright 1996 by MIT Press.

Date: 1996
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