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oX_TwoAssetCashOrNothing_Imp( ) Function

Component

Resolution - Exotic Options

 

 

Function Definition

oX_TwoAssetCashOrNothing_Imp(OptionValue, AssetOneUpDown, AssetTwoUpDown, ValueDate, ExpiryDate, SpotOne, SpotTwo, StrikeOne, StrikeTwo, Payoff, RiskFree, CarryOne, CarryTwo, VolatilityOne, VolatilityTwo, Correlation, OutputFlag)

Given an option value, calculates an implied value for a two-asset cash-or-nothing option using Heynen and Kat's (1996) method

 

 

Function Parameters

 

Parameters

Description

 

Parameter Type

 

Restrictions

.

OptionValue

 

Observed value of the option.

 

Double

 

AssetOneUpDown

 

Barrier direction.

 

Enumerated Constant

 

1 - Up
2 - Down

AssetTwoUpDown

 

Barrier direction.

 

Enumerated Constant

 

1 - Up
2 - Down

ValueDate

 

Valuation date.

 

Date

 

ExpiryDate

 

Expiry date of the option.

 

Date

 

SpotOne

 

Current market price of the first underlying asset.

 

Double

 

SpotTwo

 

Current market price of the second underlying asset.

 

Double

 

StrikeOne

 

Strike price for the first asset.

 

Double

 

StrikeTwo

 

Strike price for the second asset.

 

Double

 

Payoff

 

Amount paid out if the option expires in the money.

 

Double

 

RiskFree

 

Risk free interest rate, expressed as an annually compounded Actual 365 rate.

 

Double

 

CarryOne

 

Net cost of carry of the first underlying asset, expressed as an annually compounded Actual 365 rate.

 

Double

 

CarryTwo

 

Net cost of carry of the second underlying asset, expressed as an annually compounded Actual 365 rate.

 

Double

 

VolatilityOne

 

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

 

Double

 

VolatilityTwo

 

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

 

Double

 

Correlation

 

Correlation between the prices of the first and second assets.

 

Double

 

Correlation > -1
Correlation < 1

OutputFlag

 

Indicates which implied value to return. Note: when entering the function, the parameter for which an implied value is calculated may be left blank.

 

Enumerated Constant

 

1 - Spot One
2 - Spot Two
3 - Strike One
4 - Strike Two

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