Take the 2-minute tour ×  We all know if you back out of the BS
option pricing model you can derive and solve what the options
is "implying" as its volatility. However, what is the formula
used to derive IV (can anyone direct me to the equation)? Is
there a closed form equation? Or is it solved numerically? I
appreciate your help guys.  share|improve this question I found
this one via Google: Implied Volatility Formula –  chrisaycock
Apr 17 '13 at 2:28 yea, saw that one too. Newton method was used
here. am I right? But how is IV calculated? Anyone here use a
standard procedure? –  jessica Apr 17 '13 at 2:30  3 Answers 3
up vote 6 down vote accepted  The Black-Scholes option pricing
model provides a closed-form pricing formula $BS(\sigma)$ for a
European-exercise option with price $P$. There is no closed-form
inverse for it, but because it has a closed-form vega
(volatility derivative) $\nu(\sigma)$, and the derivative is
nonnegative, we can use the Newton-Raphson formula with
confidence.  Essentially, we cho