Hi,all
I am doing a nonlinear regression and I am going to use nls.
To Minimize:sum{(Y-BS(s,x,r,t,v)) ^2}
a<-nls(Y~BS(s,x,r,t,v))
BS is the black-scholes model.
BS<-function(s,x,r,t,v){
d1=(ln(s/x)+v^2*t/2)/(v*t^(0.5))
d2=(ln(s/x)-v^2*t/2)/(v*t^(0.5))
c=e^(rt)*(s*N(d1)-x*N(d2))
}
where s,x,r,t are known numbers
But v is dertermined by a linear regression:
ln(v)=a0+a1*n+a2*n^2
a0,a1 and a2 are the ones to be estimated.
How can write the code for these nonlinear regression?
thanks
Ted
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