Description Usage Arguments Details Examples
View source: R/recursiveTree.R
Determines the price of a European Call Option by using a recursive relationship in the binomial tree
1 | recursiveTree(S, K, sigma, r, delta, h, T = 1)
|
S |
The Stock Price |
K |
The Strike Price |
sigma |
The volatility |
r |
The risk-free continuously compounded interest rate |
delta |
The annualized dividend rate |
h |
the number of periods betwen 0 and T, where each period is of length 1/h |
T |
the expiration time |
Uses formulas for u and d presented by Cox in his forward tree model. Note that the option price converges to the Black-Scholes option price
1 | recursiveTree(S=41,K=40,sigma=0.3,r=0.08,delta=0,h=5,T=1)
|
[1] 6.916355
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