To: dxPrice subscribers
We are pleased to announce the new update to the Black-Scholes model, which is used for the Implied Volatility and Greeks calculation in dxFeed. To improve the calculation of Theta, we will now freeze the time to maturity parameter when there are 30 minutes left until the option expires.
Technical details
Currently, the implied volatility is calculated at dxFeed the following way:
- The Model Free approach is used to calculate the theoretical prices for each option.
- Considering the identified theoretical prices for the option, the implied volatility is calculated using the Black-Scholes model.
- Greeks values are then calculated given the retrieved Implied Volatility values.
Currently, when there is less than one day left until the option expires, calculating Theta accurately is almost impossible when using the Black-Scholes model. The calculated values seem to approach infinity and look confusing. After analyzing different approaches to improve this calculation, we have decided to apply the Theta adjustments to the original Black-Scholes model.
Starting from September 16, 2023, we will now freeze the time to maturity parameter when there are only 30 minutes left until the option expires. Since the time to maturity is used as a model parameter, all Greeks and Implied Volatility calculations would receive improved values after this change.
Effective date
New logic will be rolled out on September 16, 2023. No actions are required from the clients.
Please refer to dxFeed Help Desk if you have any questions or concerns.