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oX_TakeOverForEx_Imp( ) Function

Component

Resolution - Exotic Options

 

 

Function Definition

oX_TakeOverForEx_Imp(OptionValue, Units, CompanyValue, ExchangeRate, ValueDate, ExpiryDate, Strike, RiskFreeD, RiskFreeF, RateVolatility, AssetVolatility, Correlation, OutputFlag)

Given the option value, calculates an implied value for a takeover foreign-exchange call using Schnabel and Wei's (1994) method

 

 

Function Parameters

 

Parameters

Description

 

Parameter Type

 

Restrictions

.

OptionValue

 

Observed value of the option.

 

Double

 

Units

 

Number of units of foreign currency.

 

Long

 

CompanyValue

 

The value of the foreign company, expressed in units of foreign currency.

 

Double

 

ExchangeRate

 

Spot exchange rate in units of domestic currency per unit of foreign currency.

 

Double

 

ValueDate

 

Valuation date.

 

Date

 

ExpiryDate

 

Expiry date of the option.

 

Date

 

Strike

 

Strike price in units of domestic currency per unit of foreign currency

 

Double

 

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

 

RateVolatility

 

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

 

Double

 

AssetVolatility

 

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

 

Double

 

Correlation

 

Correlation between the company value 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 - Units
2 - Company Value
3 - Exchange Rate
4 - Strike
5 - Riskfree (Domestic)
6 - Riskfee (Foreign)
7 - Rate Volatility
8 - Correlation

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