Friday, January 6, 2017

How to solve for the implied stock lending rate given equity options prices?


When market makers price options on hard-to-borrow equities, they include the cost to borrow the underlying equity that their broker is going to charge them to sell the security short to hedge. I'm trying to back-out this cost. I'm guessing it is similar to implied volatility but I'm solving for the interest rate. Can anyone point me in the right direction?




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