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oBIN( ) - Constant Step BOPM Function

Component

Resolution - Vanilla Options

 

 

Function Definition

oBIN(CallPut, ExerciseStyle, ValueDate, MaturityDate, Spot, Exercise, Volatility, RiskFree, NetCarry, Steps, OutputFlag)

Calculates the option value using the standard binomial option pricing model (BOPM). Returns the option value and Greeks associated with the option (if requested).

 

 

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

ValueDate

 

Valuation date of the option.

 

Date

 

ValDate < MatDate

MaturityDate

 

Maturity date of the option.

 

Date

 

MatDate > ValDate

Spot

Current market price of the underlying asset.

 

Double

 

Spot > 0

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

OutputFlag

 

Indicates which result, or set of results, will be displayed in the worksheet. When returning more than one value, the function must be entered as an array function.

 

Enumerated Constant

 

0 - Value & Greeks
1 - Value only
2 - Delta only
3 - Gamma only
4 - Theta only
5 - Vega only
6 - Rho only

In This Section

oBIN( ) - Constant Step BOPM Definition

oBIN( ) - Constant Step BOPM Derivation

oBIN( ) Convergence Properties

oBIN( ) Net Cost of Carry Definitions

oBIN( ) Model Greeks

oBIN( ) Example - American Put Option

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