XploRe Help : barrier

Keywords - Function groups - @ A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Library:	finance
See also:	american asset bitree BlackScholes european mcmillan optstart IBTcrr IBTbc

Quantlet:		barrier
Description:		calculates barrier option prices.

Reference(s):

P.Willmots, "Paul Willmots Introduces Quantititve Finance", John Willey & Sons Ltd. 2001

Usage:	`opv =barrier(S, K, Sb, r, d, sigma, tau, knock, type)`
Input:
	`S`	d1 x ... x d8 array, the current value of the index
	`K`	d1 x ... x d8 array, exercise price
	`Sb`	d1 x ... x d8 array, barriers
	`r`	d1 x ... x d8 array, riskless interest rate
	`d`	d1 x ... x d8 array, divident rate
	`sigma`	d1 x ... x d8 array, volatility
	`tau`	d1 x ... x d8 array, time to expiration (in years)
	`knock`	string, if knock="out", "Out" or "OUT", the knock out option price is calculated; if knock="in", "In" or "IN" , the knock in option price is calculated.
	`type`	string, if type="call", "Call" or "CALL", the call option price is calculated; if type="put", "Put" or "PUT" , the put option price is calculated.
Output:
	`opv`	d1 x ... x d8 array, call option price or put option price

Note:

If S is scalar, the other parameters may be either scalars or arrays. if at least one of them is an array, the scalar parameters are considered as scalar*(unit array).

Example:

library("finance") S=100 Sb = 120 r=0.03 d = 0 K=100 tau=1 sigma=0.1 knock="out" type="call" C=barrier(S, K, Sb, r, d, sigma, tau, knock, type) C

Result:

Price of a knock out call option with one year expiration time.

Contents of C

[1,]   3.4335

Example:

library("finance") S=#(100,105)~#(110,115) Sb = 120*matrix(2,2) r=0.03 d = 0 K=100 tau=1 sigma=#(01,0.05)~#(0.2,0.01) knock="out" type="call" C=barrier(S, K, Sb, r, d, sigma, tau, knock, type) C

Result:

Price of four knock out call options, all with same parameters but
 distinct underlying volatilities.


Contents of C

[1,]  0.012536  0.72439
[2,]   7.4645   15.416

Author: S. Borak, 20031222 license MD*Tech