# PerpetualBS: Perpetual option valuation via Black-Scholes (BS) model In QFRM: Pricing of Vanilla and Exotic Option Contracts

## Description

An exotic option is an option which has features making it more complex than commonly traded options. A perpetual option is non-standard financial option with no fixed maturity and no exercise limit. While the life of a standard option can vary from a few days to several years, a perpetual option (XPO) can be exercised at any time. Perpetual options are considered an American option. European options can be exercised only on the option's maturity date.

## Usage

 `1` ```PerpetualBS(o = OptPx(Opt(Style = "Perpetual"), q = 0.1)) ```

## Arguments

 `o` AN object of class `OptPx`

## Value

A list of class `Perpetual.BS` consisting of the input object `OptPx`

## Author(s)

Kim Raath, Department of Statistics, Rice University, Spring 2015.

## References

Chi-Guhn Lee, The Black-Scholes Formula, Courses, Notes, Note2, Sec 1.5 and 1.6 http://www.mie.utoronto.ca/courses/mie566f/materials/note2.pdf

## Examples

 ``` 1 2 3 4 5 6 7 8 9 10 11 12 13``` ```#Perpetual American Call and Put #Verify pricing with \url{http://www.coggit.com/freetools} (o <- PerpetualBS())\$PxBS # Approximately valued at \$8.54 #This example should produce approximately \$33.66 o = Opt(Style="Perpetual", Right='Put', S0=50, K=55) o = OptPx(o, r = .03, q = 0.1, vol = .4) (o = PerpetualBS(o))\$PxBS #This example should produce approximately \$10.87 o = Opt(Style="Perpetual", Right='Call', S0=50, K=55) o = OptPx(o, r = .03, q = 0.1, vol = .4) (o <- PerpetualBS(o))\$PxBS ```

QFRM documentation built on May 2, 2019, 8:26 a.m.