AmericanDigitalCalls: Function that returns the price of an American Digital Call

In pcalls: Pricing of Different Types of Call

Description

Digital options, also called binary option, are options which pay a fixed payoff when the underlying stock price crosses the strike price. Thus, American Digital Options are automatically exercised as soon as they get in the money. In addition, American Digital options can be splitted in two categories: cash-or-nothing (which pays a fixed payoff in case of the underlying stock price ends up in the money) and asset-or-nothing (which pays the value of the underlying stock in case of the underlying stock price ends up in the money) options.

Usage

AmericanDigitalCalls(s0, k, t, r, vol, call_type)

Arguments

s0	stock price at time 0
k	strike price
t	time to maturity in years
r	annual interest rate
vol	annual volatility
call_type	"A":asset or "C":cash

Details

No details

Value

Price of the call

Warning

Be sure that the type of the call is "A" or "C". All input values must be stricly positive.

Author(s)

Degiorgi Elia, Milan Federico, Zaramella Davide, Stoeva Valerija

References

"Option Pricing Using Different Techniques" by Degiorgi Elia, Milan Federico, Zaramella Davide, Stoeva Valerija (2019)

Examples

AmericanDigitalCalls(10,11,1,0.05,0.2,"A") #  4.277183

pcalls documentation built on May 2, 2020, 5:05 p.m.