bsPlainVanillaOption: Compute price and greeks of plain vanilla European options
In prodipta/bsoption: Black-Scholes implementation for equity index options

Description Usage Arguments Details Value

View source: R/bsPlainVanilla.R

Compute price and greeks of plain vanilla European options ( calls and puts) using lognormal Black-76 model.

1 2	bsPlainVanillaOption(date, forward, strike, expiry, vol, type = "call", discount = 1, output = "price", model = "lognormal")

`date`	Value date of the option.
`forward`	Forward level(s) of the underlying.
`strike`	strike(s) of the option.
`expiry`	Expiry date(s).
`vol`	Volatility(s).
`type`	Option type - "call" or "put".
`discount`	Discount factor.
`output`	Output type, "price" or any other standard greeks.
`model`	Model type, only lognormal is implemented.

Black's formula is arguably more useful for pricing index options compared to traditional Black-Scholes formula. The Black-76 option pricing model uses the price of futures directly, instead of accreting the spot index at the cost of carry. This is useful where the index futures trade at prices below spot plus cost of carry, providing a model consistent with market. In many places this is now standard to use Black-76 for index options valuation for margining and fair value determination purposes. For greeks the return values are as follows: 1) delta: this returns the standard black-scholes delta, the first derivative of option price with respect to underlying. 2) gamma: this returns the change in delta for a 1 percentage point change in underlying (averaged for up and down move) 3) vega: this returns the change in option price for a absolute 1 percentage points increase in volatility 4) theta: this returns the decay in option price over one day (assumeing 260 business days in a year).

Price or greek estimate. The function is vectorized.

prodipta/bsoption documentation built on May 29, 2019, 2:57 p.m.