Take the 2-minute tour ×
Mathematics Stack Exchange is a question and answer site for people studying math at any level and professionals in related fields. It's 100% free, no registration required.

I am trying to calculate model free implied volatility $\sigma_{\mathrm{MF}}$ for a relative performance index using the following method:

$$ \sigma_{\mathrm{MF}}^2=2\sum_{i} \left[\frac{C(T,K_{i})}{K_{i}^2} - \frac{\max(0,F-K_{i})}{K_{i}^2}\right]\Delta K_{i}, $$ where $$ F=I\exp\left(\left(\frac{\sigma_{\mathrm{M}}^2-\sigma_{\mathrm{S}}^2+\sigma_{\mathrm{MF}}^2}{2}\right)T\right) $$

The only unknown here is $\sigma_{\mathrm{MF}}$.How can I implement this using Matlab? I am confused as to how I can use nonlinear optimization functions when the unknown $\sigma_{\mathrm{MF}}$ is itself inside a loop.

share|improve this question
add comment

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.

Browse other questions tagged or ask your own question.