recursiveTree: European Call Option Price (Recursive)

In nathanesau/m4fe: Models for Financial Economics

Description

Determines the price of a European Call Option by using a recursive relationship in the binomial tree

Usage

recursiveTree(S, K, sigma, r, delta, h, T = 1)

Arguments

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

Details

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

Examples

recursiveTree(S=41,K=40,sigma=0.3,r=0.08,delta=0,h=5,T=1)

nathanesau/m4fe documentation built on Sept. 9, 2019, 10:49 a.m.