A computation of implied volatility leveraging model-free option-implied information

This paper takes inspiration from recent model-free techniques for estimating the risk-free rate and dividend yield from European-style option prices. It proposes a methodology for computing implied volatility (IV) that integrates this option-derived information. Instead of relying on traditional inputs like treasury yields and historical dividend yields, our approach incorporates forward-looking estimates of the dividend-adjusted underlying asset price and the implied discount factor into the IV computation. This results in a simpler yet more informative adjustment that may prove useful in updating the computation of IV.