Re: [Quantlib-users] Query on the Option pricing traded with 0 time value

[Jonathan S. <sw...@gm...>]

Hi Ashish,

It makes sense that there would be no solution in the case where an option
has no time value. I'm not sure what else QuantLib can do in this case
except perhaps more informative error messages.

You might want to survey the literature for ways of modeling this product
outside of a Black-Scholes framework.

On Sun, Dec 18, 2022 at 1:21 AM Ashish Bansal <ash...@gm...>
wrote:

> My message was not going due to the screenshots so sending again without
> them.
>
> Please guide.
>
> Regards
> Ashish
>
> On Sat, Dec 17, 2022, 1:03 AM Ashish Bansal <ash...@gm...>
> wrote:
>
>> Hi all, any views here?
>>
>> On Tue, Dec 6, 2022, 10:15 PM Ashish Bansal <ash...@gm...>
>> wrote:
>>
>>> Hi All,
>>>
>>> In 1 of the exchange traded option market I see strange behaviour which
>>> is failing our quantlib code to value the options. The put options for
>>> nearby month are trading only at the intrinsic value with exactly 0 time
>>> value although a good 1 month is remaining in expiry which is 4th Jan 2023.
>>> Future quotes (underlying) as of 5th Dec:
>>>
>>> https://www.cmegroup.com/markets/agriculture/dairy/nonfat-dry-milk.quotes.html
>>>
>>> Option prices as of 5th Dec:
>>>
>>> https://www.cmegroup.com/markets/agriculture/dairy/nonfat-dry-milk.quotes.options.html#optionProductId=782&strikeRange=ALL&expiration=782-Z2
>>>
>>> Time value in the above trading: 16.425 - Max(160 - 143.575,0) = 0
>>>
>>> We are using the blackscholes engine with American option and using
>>> option.impliedvolatility method to calculate the market implied volatility
>>> for these options. For these options, we are getting runtime error as root
>>> not bracketed error:
>>> RuntimeError: root not bracketed: f[0.0001,4] ->
>>> [6.394885e-14,5.818200e+01]
>>>
>>> How should we price these kinds of ITM options?
>>>
>>> Thanks
>>> Ashish Bansal
>>>
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