I have two implementations for finding the implied volatility under Black-Scholes formula. One is bisection and the other is brent's method. (I know Newton-Raphson is popular due to speed and will support this as well later...).
My question seems to be related to this question: Lower bound of ITM Calls when computing Implied Volatility
Basically, I notice that the implied volatility calculation breaks down for deep in the money call options and probably deep in the money put options (same for deep out of the money options of both types?).
double r = 0.05; double T = 0.00274; double S = 50.0; double K = 1.0;
For these arguments, it seems any volatility value will do as the option premium from BS is always ~49.00015... and so a unique implied volatility cannot be found?
I would like to provide some method that can provide a fast check on the input that would ideally check analytical bounds for when bisection/brent will give back sound answers and when the input arguments belong to a "degenerate" case.
Are such bounds well-known? Any link to an article available would be appreciated.