Estimating Lamda in Matlab to Calculate the Leverage Return of Call and Put Options Implied Volatility by Comparing the Theoretical Price With the Market Price

In this article, we estimate Lamda in matlab to calculate the leverage return of 3 months call and put options implied volatility by comparing the theoretical price with the market price of a Danish investment bank. There is significant time variation in the implied volatility and the traditional Black – Scholes model can not explain this deviation. The Black – Scholes model is used to calculate the theoretical call option price. Applying lognormal implied distribution help us to price the contract at a market price and get better estimates of a risk adjusted measure. Deep in or out of the money contract has higher implied volatility. We have found that the 3 month call and put options Lamda contracts are overpriced relative to other call market prices. There are speculation opportunities as the 3 months call and put options are not steep and the volatility is increased