EuropeanBSCall

Purpose

Prices European call options using Black, Scholes and Merton method.

Format

c = EuropeanBSCall(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(2012, 1, 30);
t1 = dtday(2012, 2, 16);
tau = elapsedTradingDays(t0, t1) /
    annualTradingDays(2012);
c = EuropeanBSCall(S0, K, r, 0, tau, sigma);
print c;

produces:

17.1351
14.7955
12.6860

Source

finprocs.src