<< bsimpvol Financial module cfr >>

Financial module >> Financial module > bsoption

bsoption

Compute the value of both a call and a put option in a Black and Scholes framework (with both constant riskless interest rate and volatility)

SYNOPSIS

[C,P]=bsoption(S,K,r,T,sigma);

Description

Compute the Black and Scholes value of both a call and a put option

Parameters

S

current price of the underlying asset

K

strike price of the option

r
riskless interest rate (assumed to be constant until the maturity)
T
time to maturity; it must be in the same time unit of measure as the riskless interest rate (if the riskless interest rate is annual, then an option with maturity of 3 months must have T=3/12)
sigma
the volatility of the underlying (log-) returns; it must have the same time unit of measure as the riskless interest rate

Output

C
value of a call option
P
value of a put option

Example

We assume that an option (either call or put) is written on an asset whose value is 25 euros, with a strike price of 25 euros. If the (annual) riskless interest rate is 0.001, the time to maturity is 3 months, and the (annual) volatility of the underlying (log-) returns is 0.22, then the value of the call and the put options are computed as follows.

-->[C,P]=bsoption(25,25,0.001,3/12,0.22)

P = 1.0932796

C = 1.0995288

Authors

Francesco Menoncin - Brescia University - 2010

See Also


<< bsimpvol Financial module cfr >>