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Forward Start Options

Forward start options are priced using the Rubinstein (1990) formula:

where

,

and where

c = Price of European call

p = Price of European put

S = The spot of the underlying asset

b = The cost of carry

r = The risk free rate

T = Time to expiry of the option

t = Elapsed time

N = The cumulative normal distribution function

= a positive constant, where the strike = S

= Volatility of underlying asset's price

 

See Also

oX_ForwardStart( ) Function

oX_ForwardStart_Imp( ) Function

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