where to get interest rate?

[mizhael]

Quote from gkishot:

Any website that publishes the interest rate would have some delay in updating it.

Especially if you need to use Libor rate which I believe is the case. Since Libor rate I think is not even announced by any body. So what is your definition of 'instanteneous'? Those rates have to be updated on the web once a day at the closing. Unless of course you want to use real-time data by reuters. But this is unnecessary for most purposes.

In fact I am not sure if I should use Libor or other rate.

 

[mizhael]

Quote from gkishot:

Why won't you use the Libor rate from Bloomberg?

Shall I use Libor rate, or not?

Why shouldn't I use my cost of capital, especially if I do replication, and BS is derived using stock and bond...

 

[mizhael]

Quote from riskfreetrading:

The interest rates you should use are in the option prices themselves. Here how to obtain them: go to an etf such as IWM.
Take ATM strike. (Call-Put) gives the interest. Divided it by strike and annualize the rate. Make sure that the option chain is not an option chain for end of quarter.

That is it! Please confirm you findings.

Why not "end of quarter"?

 

[mizhael]

Quote from pcdunham:

You get implied volatility from the market price of options. The interest rate used is always the risk free rate which is usually 1 month LIBOR

Why should it be 1 month LIBOR?

 

[mizhael]

Quote from riskfreetrading:

I think you are right, and it should do that, as the american put can be higher in price than the american put in the absence of dividend and other unsual conditions. This would mean that the interest rate can be undervalued using the call-put calculation.
I however have noticed that the ATM IWM put options are generally valued the same as a european put.

so this implied method doesn't work?

 

[pcdunham]

Quote from mizhael:

so this implied method doesn't work?

No, it doesn't. The risk free rate is assumed to be constant in any theoretical model. The risk free rate effects the value of an option, but the market value of an option does not effect the risk free rate of interest. You can use LIBOR, but short term t-bills are probably better for options in the U.S. I've heard people use LIBOR, but your best bet is short term government securities. but the only time ho matters is if rates move a huge amount or with leaps where interest rates may change substantially over the life of the option

 

[riskfreetrading]

Quote from mizhael:

Why not "end of quarter"?

dividend

 

[riskfreetrading]

Quote from mizhael:

so this implied method doesn't work?

Do it on a european style. For instance XEO or OEX (one of the two is european).