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

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

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unclepaul84 · External communityPost link
External question — Quantitative Finance Stack Exchange Author: unclepaul84 Original post: https://quant.stackexchange.com/questions/1807 License: CC BY-SA 3.0 — https://creativecommons.org/licenses/by-sa/3.0/ Adaptation: HTML converted to plain text; contact email addresses removed. 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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OGC · External communityPost link
External answer — Quantitative Finance Stack Exchange Author: OGC Original post: https://quant.stackexchange.com/a/36470 License: CC BY-SA 3.0 — https://creativecommons.org/licenses/by-sa/3.0/ Adaptation: HTML converted to plain text; contact email addresses removed. I realize I'm resurrecting an old thread, but I don't think the answers were clear enough. You can get a really good estimate for borrow rate by doing: Calculate the forward by adding Strike Price + Call Price - Put Price. The forward rate represents Spot - dividends + interest - borrow rate. The forward rate is also (Forward ÷ Spot) - 1. If you can accurately estimate dividends and interest rates, then the remainder would be the cost to borrow implied by the options market.
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