Negative rates in blsprice

Why is negative rates not allowed in function 'blsprice'?

Answer 1

[Vineeth Kartha]

Hi,

Negative rates are not allowed in BLSPRICE.

However, you can modify the function 'blscheck.m' called by BLSPRICE opening it in the MATLAB Editor by typing in the MATLAB Command Window:

 >> edit blscheck

Then, commenting out the lines 66-69:

 if any(Rate(:) < 0)

      error(message('finance:blscheck:NegativeRiskFreeRate'));

   end

will prevent the code from stopping when a negative rate is used in BLSPRICE.

Hope this helps.

Regards

Vineeth

[Saurabh Roy]

thanks!