Black-76 Model Implied Volatility Calculator in Excel

July 28, 2012

I recently needed a calculator for implied volatility in the Black-76 model (options on futures).

This simple Excel Spreadsheet does the calculation.  Simply enter the other parameters and press the button to calculate the implied volatility.  You could use it repeatedly to build a commodity volatility smile.  Note that it assumes European options whereas many commodity options are American.

The Black-76 model is essentially the same as the normal Black-Scholes model, but takes into account that you only pay to take delivery of a future on expiry, hence you don’t incur funding costs prior to that date.

 

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Copper Futures Curve and Inventory, 2003-2012

July 28, 2012

I produced a video for the world copper conference in Chile a few months back.  It shows the futures curve of copper and its price, as well as inventory.  You can clearly see the effect of inventory on the futures curve and price.  The 2008 onwards recession has caused a significant inventory build.

 


Send me your questions!

July 18, 2012

Send me your questions on commodities (related to financial modelling) and I’ll do my best to answer or suggest further reading.  Post them at www.commoditymodelling.com .