CevPrice: Calculate the constant elasticity of variance (CEV) model...

In FER: Financial Engineering in R

Description

Calculate the constant elasticity of variance (CEV) model option price

Usage

CevPrice(
  strike = forward,
  spot,
  texp = 1,
  sigma,
  beta = 0.5,
  intr = 0,
  divr = 0,
  cp = 1L,
  forward = spot * exp(-divr * texp)/df,
  df = exp(-intr * texp)
)

Arguments

strike	(vector of) strike price
spot	(vector of) spot price
texp	(vector of) time to expiry
sigma	(vector of) volatility
beta	elasticity parameter
intr	interest rate (domestic interest rate)
divr	dividend/convenience yield (foreign interest rate)
cp	call/put sign. 1 for call, -1 for put.
forward	forward price. If given, forward overrides spot
df	discount factor. If given, df overrides intr

Value

option price

References

Schroder, M. (1989). Computing the constant elasticity of variance option pricing formula. Journal of Finance, 44(1), 211-219. doi: 10.1111/j.1540-6261.1989.tb02414.x

Examples

spot <- 100
strike <- seq(80,125,5)
texp <- 1.2
beta <- 0.5
sigma <- 2
FER::CevPrice(strike, spot, texp, sigma, beta)

FER documentation built on March 5, 2021, 5:06 p.m.