Description Usage Arguments Details Value Author(s) References Examples
Pricing of currency futures American option using a binomial approximation
1 | am_call_bin_currency(S, K, r, r_f, sigma, t, steps)
|
S |
spot price |
K |
exercice price |
r |
domestic interest rate |
r_f |
foreign interest rate |
sigma |
volatility |
t |
time to maturity |
steps |
number of steps in binomial tree |
American options written on foreign currencies are priced using a standard binomial tree. The notable point is that early exercise is driven by the difference between national interest rates.
call_price |
Option price |
Paolo Zagaglia, paolo.zagaglia@gmail.com
John Hull, "Options, Futures and other Derivative Securities", Prentice-Hall, second edition, 1993.
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