Hi GK For some reason part of the code is deleted (automatically???) in both my posts. So there you have it Pascal source code is obscene! If you want an unedited copy just email me at stone_pony2000 at hotmail.
The "c" variable is just a global variable - would have been declared in the vars list of the program file. The value of c is simply the call option price observed in the marketplace.
As per your other questions: xn1:=0.18 and xn:=0.3 these are just bootstrapped starting high and low values to look for implied volatility. Numerical procedure is more efficient the better the guesses - these were mine at the time.
tol:=0.001 this is the incremental tolerance value for improving the estimate of ivola
j:=0 this initialises the iteration counter - I found that the function usually converged well before 8 iterations but its there to prevent the program hanging when it somehow fails to converge.
Anybody found out about "negative implied volatility" yet???? impossible??? If you haven't, you will have fun when you do.
