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XFGIBT02 (MatLab R2007b)

plots an estimated state price density of the stock prices estimated by implied binomial tree and plots the estimated implied local volatility surface. Require IBTbc.m, IBTdk.m, IBTimpliedvola.m, IBTblackscholes.m, IBTcrr.m, IBTlocsigma.m, IBTsdisplot.m, IBTvolaplot.m, regxest.m,

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Author:

Jun Zheng, Alena Mysickova

Published in:

Applied Quantitative Finance

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Submitted:

Fri, July 27 2012 by Dedy Dwi Prastyo

Usage:

IBTbc, IBTdk, IBTimpliedvola, IBTblackscholes, IBTcrr, IBTlocsigma, IBTsdisplot, IBTvolaplot, regxest,

Datafiles:

XFGIBT02.asv

Input:

- Price of underlying asset, Interest rate, Time to expiration, Number of steps

Output:

- Plot of the estimated state price density and the estimated implied local volatility surface

Example:

Description: -

Sourcecode:

format short
disp('Please input Price of Underlying Asset s0, Riskless Interest Rate per Year r');
disp('Time to Expiration (Years) t, Number of steps n');
disp('as: [100, 0.03, 5, 40]');
disp(' ') ;
para=input('[s0, r, t, n]=');
while length(para) < 4
  disp('Not enough input arguments. Please input in 1*4 vector form like [100, 0.03, 5, 5]');
  disp(' ') ;
  para=input('[s0, r, t, n]=');
end
s0=para(1);             % Stock price
r=para(2);              % Riskless interest rate	
t=para(3);			    % Time to expiration
n=para(4);              % Number of intervals format short
[St, AD, P, LV] = IBTdk(s0,r,t,n,[]);          % Derman & Kani
dat=[St(:,n+1) (AD(:,n+1)*exp(r*t))];
bandwidth=20;
in = find(dat(:,2)>0.005);
dat = dat(in,:);
figure(1)
IBTsdisplot(dat, bandwidth); % Density plot
deltat=t/n;
[loc,lv,strike,mat]=IBTlocsigma(St, P, n, deltat);
startpoint=0
endpoint=150
figure(2)
IBTvolaplot(loc,deltat,startpoint,endpoint,20); % Implied local volatility surface