OptionMetrics, an options database and analytics provider for institutional investors and academic researchers worldwide, implementing new options implied methodology, offering even greater accuracy in options calculations in the US, Europe, Asia Pacific.
OptionMetrics replaces the zero curve (used by other providers) with its implied yield curve, constructed with a term structure of overnight rates and implied risk-free rates from options on major indices, for more accurate implied volatility, forward price, index dividend, and borrow rate calculations.
In leveraging data from index options, OptionMetrics more accurately reflects costs of borrowing and lending in options markets. The methodology reduces implied volatility spreads and offers true volatility and Greek calculations compared to leveraging private bank lending rates or other measures that may include credit risk or unrealistic borrowing assumptions.
Overnight rates, such as SOFR, are also used in the methodology for options expiring in less than 30 days to reduce noise associated with short-dated contracts. As the new standard over LIBOR, SOFR also has nearly zero credit risk exposure.
