unexpected result from function "blsimpv"

Hi:

I use command to calculate option IV but returns nan, this particularly happen while the strike price is ITM (in the money), I read through the documentation and I believe I'm using the correct inputs. so maybe this is a bug?

blsimpv(455,385, 0.1, 7.420091324200912e-04,67,'Class',{'Call'}, 'Limit',100)*100

Thanks!

Yu

Answer 1

[Aabha]

Hi @Yu Li,

I understand that you are using the ‘blsimpv’ function in MATLAB to compute the implied volatility of an option, but you're getting a result of ‘NaN’. This usually happens when the inputs to the function are inconsistent or violate assumptions in the Black-Scholes model, making it impossible for the function to converge to a volatility value.

For a European call option, the intrinsic value is calculated as:

value = max(currentStockPrice - strikePrice, 0);

In this case, the minimum value of the ‘Value’ parameter should be (455 – 385) = 70, from the specified values of prices. Since the specified value parameter is less than 70 in this case, it violates the assumptions in the Black-Scholes model, leading to the ‘NaN’ result. The function provides the expected numerical result when the ‘Value’ parameter is changed as per the following:

blsimpv(455, 385, 0.1, 7.420091324200912e-04, 75, 'Class',{'Call'}, 'Limit',100) * 100

ans = 582.0327

Please refer to the following documentation link for more information about the 'blsimpv' function:

https://www.mathworks.com/help/releases/r2025a/finance/blsimpv.html

I hope this helps.