Calloption

Function Calloption(s,x,t,r,theta)

Calculates the value of a call option using the Black-Scholes formula.

Example

Calloption(50,50,0.25,0.05,0.3) ==> 3.292

Expects

s, x, t, r, and theta all as numeric.

Parameters

s is the price of the security now;
s is the exercise price;
t is the time in years to exercise;
r is the risk-free interest rate;
and theta is the volatility of the security.

Function definition

USING d1 := (ln(s/x) + t * (r+ (0.5 * theta^2))) / (theta * t^0.5)
DO s * Cumnormal(d1) - (x * exp(-r * t) * Cumnormal(d1 - (theta * t^0.5)))

Syntax

Calloption(s,x,t,r,theta : Numeric)

Library

Financial functions

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