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oX_Quanto_Imp( ) Function

Component

Resolution - Exotic Options

 

 

Function Definition

oX_Quanto_Imp(OptionValue, CallPut, ForeignValue, FXRateSpot, FXRateFixed, ValueDate, ExpiryDate, Spot, Strike, RiskFreeD, RiskFreeF, DividendYield, RateVolatility, AssetVolatility, Correlation, OutputFlag)

Given the option value, calculates an implied value for a fixed exchange-rate foreign-equity option (quanto)

 

 

Function Parameters

 

Parameters

Description

 

Parameter Type

 

Restrictions

.

OptionValue

 

Observed value of the option.

 

Double

 

CallPut

 

Option type.

 

Enumerated Constant

 

1 - Call
2 - Put

ForeignValue

 

Should the option value be returned in units of Foreign or Domestic currency?

 

Enumerated Constant

 

1 - Foreign
2 - Domestic

FXRateSpot

 

Spot exchange rate. When the option value is returned in units of foreign currency, the exchange rate should be quoted in units of foreign currency per unit of domestic currency. When the option value is returned in units of domestic currency, the exchange rate should be quoted in units of domestic currency per unit of foreign currency.

 

Double

 

FXRateFixed

 

Fixed exchange rate. When the option value is returned in units of foreign currency, the exchange rate should be quoted in units of foreign currency per unit of domestic currency. When the option value is returned in units of domestic currency, the exchange rate should be quoted in units of domestic currency per unit of foreign currency.

 

Double

 

ValueDate

 

Valuation date.

 

Date

 

ExpiryDate

 

Expiry date of the option.

 

Date

 

Spot

 

Current market price of the underlying asset.

 

Double

 

Spot > 0

Strike

 

Strike price of the option.

 

Double

 

Strike > 0

RiskFreeD

 

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

 

Double

 

RiskFreeF

 

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

 

Double

 

DividendYield

 

Continuous dividend yield of the underlying asset, expressed as an annually compounded Actual/365 rate.

 

Double

 

RateVolatility

 

Annualized volatility of the exchange rate, expressed as a decimal.

 

Double

 

RateVolatility > 0

AssetVolatility

 

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

 

Double

 

AssetVolatility > 0

Correlation

 

Correlation between the asset price and the domestic exchange rate.

 

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
2 - Strike
3 - Riskfree (Domestic)
4 - Riskfree (Foreign)
5 - Dividend Yield
6 - Asset Volatility
7 - Rate Volatility
8 - Correlation
9 - Fixed Exchange Rate

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