Description Usage Arguments Value References See Also Examples
The payout of the spread option is
max(S1_T - S2_T - K, 0)
where S1_T
and S2_T
are the
prices at expiry T
of assets 1 and 2 respectively and K
is
the strike price.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 |
strike |
(vector of) strike price |
spot1 |
(vector of) spot price of asset 1 |
spot2 |
(vector of) spot price of asset 2 |
texp |
(vector of) time to expiry |
sigma1 |
(vector of) volatility of asset 1 |
sigma2 |
(vector of) volatility of asset 2 |
corr |
correlation |
intr |
interest rate |
divr1 |
dividend rate of asset 1 |
divr2 |
dividend rate of asset 2 |
cp |
call/put sign. |
forward1 |
forward price of asset 1. If given, overrides |
forward2 |
forward price of asset 2. If given, overrides |
df |
discount factor. If given, |
option price
Kirk, E. (1995). Correlation in the energy markets. In Managing Energy Price Risk (First, pp. 71–78). Risk Publications.
1 | FER::SpreadKirk((-2:2)*10, 100, 120, 1.3, 0.2, 0.3, -0.5)
|
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