option.call: Call Option

In FinancialMath: Financial Mathematics for Actuaries

Description

Gives a table and graphical representation of the payoff and profit of a long or short call option for a range of future stock prices.

Usage

option.call(S,K,r,t,sd,price=NA,position,plot=FALSE)

Arguments

S	spot price at time 0
K	strike price
r	continuously compounded yearly risk free rate
t	time of expiration (in years)
sd	standard deviation of the stock (volatility)
price	specified call price if the Black Scholes pricing is not desired (leave as NA to use the Black Scholes pricing)
position	either buyer or seller of option ("long" or "short")
plot	tells whether or not to plot the payoff and profit

Details

Stock price at time t =S_t

Long Position:

payoff = max(0,S_t-K)

profit = payoff - price*e^{r*t}

Short Position:

payoff = -max(0,S_t-K)

profit = payoff + price*e^{r*t}

Value

A list of two components.

Payoff	A data frame of different payoffs and profits for given stock prices.
Premium	The price for the call option.

Note

Finds the call price by using the Black Scholes equation by default.

Author(s)

Kameron Penn and Jack Schmidt

See Also

option.put

bls.order1

Examples

option.call(S=100,K=110,r=.03,t=1.5,sd=.2,price=NA,position="short")

option.call(S=100,K=100,r=.03,t=1,sd=.2,price=10,position="long")

FinancialMath documentation built on May 1, 2019, 11:16 p.m.