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

[Ashish B. <ash...@gm...>]

Asking about this query in other thread

On Sun, Dec 18, 2022, 6:15 PM Ashish Bansal <ash...@gm...> wrote:

> Strangely i tried the CME option calculator online to gat IV for this kind
> of option trading at intrinsic value. And still it gave some IV without any
> errors with Black76 model too. Not sure how they do it.
>
> Ashish
>
> On Sun, Dec 18, 2022, 5:55 PM Jonathan Sweemer <sw...@gm...> wrote:
>
>> 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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