Newbie wrote: > > Dear R-users > > I am trying to find a value for the risk free rate minimizing the > difference between a BS call value with impl. volatilities minus the > market price of a call (assuming this is just the average bid ask price) > > Here is my data: > > http://r.789695.n4.nabble.com/file/n3747509/S%26P_500_calls%2C_jan-jun_2010.csv > S%26P_500_calls%2C_jan-jun_2010.csv > > S0 <- 1136.03 > q <- 0.02145608 > S0 <- spot[10,6] > S0 > strike <- marketdata[1:460,9] > T <- marketdata[1:460,17]/365 #Notice the T is measured in years now > implvol <- marketdata[1:460,12] > ask <- marketdata[1:460,10] > bid <- marketdata[1:460,11] > mid_bidask <- (bid + ask) /2 > r <- 0.020 > > And my code: > BS_Call <- function(S0, K, T, r, sigma, q) # Which works > fine > { > sig <- sigma * sqrt(T) > d1 <- (log (S0/K) + (r - q + sigma^2/2) * T ) / sig > d2 <- d1 - sig > Presentvalue <- exp(-r*T) > return (S0 * exp(-q*T) * pnorm(d1) - K*Presentvalue*pnorm(d2)) > } > > > #I now define the function I later want to minimize with respect to r > difference <- function (S0, K, T, r, sigma, q, mid) > { > return(BS_Call(S0, strike, T, r, sigma, q)- mid_bidask)) > } > # which gives 460 values as it should, as T = 460 > > f <- function(x) difference(S0, strike, T, x, implvol, q, mid_bidask) > # If I now run > nlminb(start=r, f) > > $par > [1] -0.9800001 > > $objective > [1] -395.85 > > $convergence > [1] 0 > > $iterations > [1] 2 > > $evaluations > function gradient > 3 4 > > $message > [1] "relative convergence (4)" > # But the risk free interest rate should not be negative, and the > objective function gives an negative values when in should be minizimed to > 0. > > # I then try adding the following to nlminb, as I understand it to set the > objective function to non-negative > nlminb(start=r, f, control = list(rel.tol=1e-20)) > > $par > [1] 0.02 > > $objective > [1] 0 > > $convergence > [1] 1 > > $iterations > [1] 0 > > $evaluations > function gradient > 0 0 > > $message > [1] "'control' component 'rel.tol' = 1e-20, is out of range" > > #which always gives me the initial value > I have tried to read other relevant R help posts, but nothing I do seems > to work. Is there anyone who can help me with what I am doing wrong? > > I have also try summing the difference function, but the same errors > occur. > Thanks > > Rikke >
How did you read the .csv? Where does variable "spot" come from? Berend -- View this message in context: http://r.789695.n4.nabble.com/Calibrating-the-risk-free-interest-rate-using-nlminb-tp3747509p3747601.html Sent from the R help mailing list archive at Nabble.com. ______________________________________________ R-help@r-project.org mailing list https://stat.ethz.ch/mailman/listinfo/r-help PLEASE do read the posting guide http://www.R-project.org/posting-guide.html and provide commented, minimal, self-contained, reproducible code.
