Bianconi, Marcelo; MacLachlan, Scott; Sammon, Marco - Department of Economics, Tufts University - 2014
This paper implements an algorithm that can be used to solve systems of Black-Scholes equations for implied volatility and implied risk-free rate of return. After using a seemingly unrelated regressions (SUR) model to obtain point estimates for implied volatility and implied risk-free rate, the...