AmericanBSCall#
Purpose#
Prices American call options using the Black, Scholes, and Merton method.
Format#
- c = AmericanBSCall(S0, K, r, div, tau, sigma)#
- Parameters:
S0 (scalar) – current price.
K (Mx1 vector) – strike prices.
r (scalar) – risk free rate.
div (scalar) – continuous dividend yield.
tau (scalar) – elapsed time to exercise in annualized days of trading.
sigma (scalar) – volatility.
- Returns:
c (Mx1 vector) – call premiums.
Examples#
S0 = 718.46;
K = { 720, 725, 730 };
r = .0498;
sigma = .2493;
t0 = dtday(2001, 1, 30);
t1 = dtday(2001, 2, 16);
tau = elapsedTradingDays(t0, t1) /
annualTradingDays(2001);
c = AmericanBSCall(S0, K, r, 0, tau, sigma);
print c;
produces:
17.249367
14.908466
12.796356
References#
This procedure is based upon a quadratic approximation method described by John C. Hull. http://www-2.rotman.utoronto.ca/~hull/technicalnotes/TechnicalNote8.pdf Accessed August 2017.
Source#
finprocs.src