supersharebybls
Determine price of supershare digital options using Black-Scholes model
Description
Examples
Compute the Price of Supershare Digital Options Using Black-Scholes Model
This example shows how to compute the price of supershare digital options using Black-Scholes model. Consider a supershare based on a portfolio of nondividend paying stocks with a lower strike of 350 and an upper strike of 450. The value of the portfolio on November 1, 2008 is 400. The risk-free rate is 4.5% and the volatility is 18%. Using this data, calculate the price of the supershare option on February 1, 2009.
Settle = 'Nov-1-2008'; Maturity = 'Feb-1-2009'; Rates = 0.045; Basis = 1; Compounding = -1; % create the RateSpec RateSpec = intenvset('ValuationDate', Settle, 'StartDates', Settle,... 'EndDates', Maturity, 'Rates', Rates, 'Compounding', Compounding, 'Basis', Basis); % define the StockSpec AssetPrice = 400; Sigma = .18; StockSpec = stockspec(Sigma, AssetPrice); % define the high and low strike points StrikeLow = 350; StrikeHigh = 450; % calculate the price Pssh = supersharebybls(RateSpec, StockSpec, Settle, Maturity,... StrikeLow, StrikeHigh)
Pssh = 0.9411
Input Arguments
StockSpec
— Stock specification for underlying asset
structure
Stock specification for the underlying asset. For information on the stock
specification, see stockspec
.
stockspec
handles several
types of underlying assets. For example, for physical commodities the price
is StockSpec.Asset
, the volatility is
StockSpec.Sigma
, and the convenience yield is
StockSpec.DividendAmounts
.
Data Types: struct
Settle
— Settlement or trade date
serial date number | date character vector
Settlement or trade date for the basket option, specified as an
NINST
-by-1
vector of serial date
numbers or date character vectors.
Data Types: double
| char
| cell
Maturity
— Maturity date
serial date number | date character vector
Maturity date for the basket option, specified as an
NINST
-by-1
vector of serial date
numbers or date character vectors.
Data Types: double
| char
| cell
StrikeLow
— Low strike price values
vector
Low strike price values, specified as an
NINST
-by-1
vector.
Data Types: double
StrikeHigh
— High strike price values
vector
High strike price values, specified as an
NINST
-by-1
vector.
Data Types: double
Output Arguments
Price
— Expected prices for supershare option
vector
Expected prices for supershare option, returned as a
NINST
-by-1
vector.
More About
Supershare Option
A supershare option pays out a proportion of the assets underlying a portfolio if the asset lies between a lower and an upper bound at the expiry of the option.
For more information, see Digital Option.
Version History
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