Derives VaR of a short Black Scholes put option

Description

Function derives the VaR of a Short Black Scholes put for specified confidence level and holding period, using analytical solution.

Usage

1
ShortBlackScholesPutVaR(stockPrice, strike, r, mu, sigma, maturity, cl, hp)

Arguments

stockPrice

Stock price of underlying stock

strike

Strike price of the option

r

Risk-free rate and is annualised

mu

Mean return

sigma

Volatility of the underlying stock

maturity

Term to maturity and is expressed in days

cl

Confidence level and is scalar

hp

Holding period and is scalar and is expressed in days

Value

Price of European put Option

Author(s)

Dinesh Acharya

References

Dowd, Kevin. Measuring Market Risk, Wiley, 2007.

Hull, John C.. Options, Futures, and Other Derivatives. 4th ed., Upper Saddle River, NJ: Prentice Hall, 200, ch. 11.

Lyuu, Yuh-Dauh. Financial Engineering & Computation: Principles, Mathematics, Algorithms, Cambridge University Press, 2002.

Examples

1
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# Derives VaR of a short Black Scholes put option
   ShortBlackScholesPutVaR(27.2, 25, .03, .12, .2, 60, .95, 40)

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