We provide an accurate approximation method for inverting an option price to the implied volatility under arithmetic Brownian motion, which is widely quoted in Fixed Income markets. The maximum error in the volatility is in the order of 10-10 of the given option price and much smaller for the...

We provide an accurate approximation method for inverting an option price to the implied volatility under arithmetic Brownian motion. The maximum error in the volatility is in the order of 1e-10 of the given option price and much smaller for the near-the-money options. Thus our approximation can...

This article expresses the price of a spread option as the sum of the prices of two compound options. One compound option is to exchange vanilla call options on the two underlying assets and the other is to exchange the corresponding put options. This way we derive a new closed form...