Previous Topic

Next Topic

oBIN_IS( ) - Constant Step BOPM Implied Spot Function

Component

Resolution - Vanilla Options

 

 

Function Definition

oBIN_IS(CallPut, ExerciseStyle, OptionValue, ValueDate, MaturityDate, Exercise, Volatility, RiskFree, NetCarry, Steps)

Uses the Newton-Raphson iteration procedure to calculate the implied spot price that equates the given market price of the option with the BOPM price of the option. Returns the implied spot only.

 

 

Option Types

Suitable for American options on Stocks, Stock Indices, Currencies and Futures.

 

 

Function Parameters

 

Parameters

Description

 

Parameter Type

 

Restrictions

.

CallPut

 

Option type.

 

Enumerated Constant

 

1 - Call
2 - Put

ExerciseStyle

Exercise type of the option.

 

Enumerated Constant

 

1 - European
2 - American

OptionValue

Current market price of the option.

 

Double

 

Option Value > 0

ValueDate

 

Valuation date of the option.

 

Date

 

ValDate < MatDate

MaturityDate

 

Maturity date of the option.

 

Date

 

MatDate > ValDate

Exercise

 

Exercise price of the option.

 

Double

 

Exercise > 0

Volatility

 

Annualized volatility of the underlying asset, expressed as a decimal.

Double

 

Volatility > 0%

RiskFree

 

Risk free interest rate, entered as either a single rate (act/365) or as a user defined zero curve object.

 

Double or Curve

RiskFree >= 0%

NetCarry

 

The net cost of carry, entered as either a single rate or as a user defined rate curve object. See net cost of carry definitions for different option types.

 

Double or Curve

 

 

Steps

 

The number of steps in the binomial tree. Although there is no upper limit, the speed of calculation will deteriorate for high step numbers.

 

Long

 

Steps >= 2

Return to www.derivativepricing.com website

Copyright 2013 Hedgebook Ltd.