# Implied Volatility vs Actual Volatility Calculation

To build a term structure I need different volatilities; as I don't get them at every strike, I use interpolation technique to calculate the rest and plot. This is how I calculate the implied vols. How is the Newton-Raphson method used to calculate the implied vols? Is it another way to calculate like I calculate with interpolation techniques? Is my understanding correct? Now what ae actual vols and how are they calculated?

Edit: Basically I want to understand how the Newton-Raphson method is used to calculate to implied volatility and what is the difference between the Newton-Raphson method and interpolation methods?

What is the difference between implied volatility and actual/local volatility?

• From your question I cannot quite understand what you are aiming to achieve - can you offer a more precise description of what you are doing? As to your last question - there are at least two concepts of deriving volatility: implied volatility, which is derived from option prices and realised volatility, which uses past returns of an asset. Perhaps the latter is what you refer to as "actual vols"? Commented Sep 8, 2020 at 15:37
• edited the question Commented Sep 8, 2020 at 16:52