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 bs1 european optstart volatility

Quantlet: mcmillan
Description: calculates option prices using the McMillan formula

Usage: mcmillan(eopv,sel,task,ingred)
eopv scalar, price of the European option
sel 2 x 1 vector, sel=1|0 means 'call', sel=0|1 'put'
task scalar, specifies the dividend payment: for task=1, no dividend is paid, for task=2, a continuously paid dividend is considered, for task=3, a fixed dividend at the end of T is assumed, for task=4, an exchange rate is assumed as underlyer. Note that if the underlying asset is a commodity, then the additional costs (e.g. storage or insurance) are modelled as negative continuously paid dividends.
ingred 6 x 1 vector; the first column represents the stock price, the second the strike price, the third column the time to expiration, the fourth specifies the volatility, the fifth the domestic interest rate and the sixth one the dividend.

eopv=12.70  	; Price of the corresponding Call option
sel=1|0		; Specifying a call
task=3		; Dividend payment at T
ingred=230|231|0.3|0.25|0.02|0.3 		; features

Option price using MC Millans formula:
[1,] " "
[2,] "-------------------------------------"
[3,] " The Price of Your American Call-Option "
[4,] " on Given Stock with fixed Dividend is"
[5,] "14.5089"
[6,] "-------------------------------------"
[7,] " "

Author: S. Sperlich, R. Mohrmann, W. Haerdle, 19970220 license MD*Tech
(C) MD*TECH Method and Data Technologies, 05.02.2006