Description Usage Arguments Details Value Author(s) References Examples

View source: R/AmericanCallOpt.R

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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