Binomial pricing of a futures American call

Description

Pricing of American call option on futures using a binomial approximation

Usage

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am_call_bin_futures(F, K, r, sigma, t, steps)

Arguments

F

price of futures contract

K

exercise price

r

risk-free interest rate

sigma

volatility

t

time to maturity

steps

number of steps in binomial tree

Value

call_price

Option price

Author(s)

Paolo Zagaglia, paolo.zagaglia@gmail.com

References

John Hull, "Options, Futures and other Derivative Securities", Prentice-Hall, second edition, 1993.

Examples

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rm(list=ls())

F<-50 
K<-45
r<-0.08 
sigma<-0.2
t<-0.5
steps<-100

call_price_bin_futures<-am_call_bin_futures(F, K, r, sigma, t, steps)