ReverseConvertible: Reverse Convertible Certificate valuation using pricing by...

In fCertificates: fCertificates - Basics of Certificates and Structured Products Valuation

Description

values a Reverse Convertible Certificate using pricing by duplication

Usage

ReverseConvertible(S, Cap, Time, r, r_d, sigma, nominal, coupon)

Arguments

S	the asset price, a numeric value.
Cap	the cap, a numeric value.
Time	time to maturity measured in years
r	the annualized rate of interest, a numeric value; e.g. 0.25 means 25% pa.
r_d	the annualized dividend yield, a numeric value; e.g. 0.25 means 25% pa.
sigma	the annualized volatility of the underlying security, a numeric value; e.g. 0.3 means 30% volatility pa.
nominal	nominal value, e.g. 1000 EUR
coupon	annualized coupon rate, e.g. 0.14 means 14% coupon p.a.

Details

Duplication:

• coupon bond with nominal value nominal and coupon coupon

• nominal/Cap short puts with strike price equal to Cap

Also known as:

• Aktienanleihe

Classification according to the SVSP Swiss Derivative Map 2008: Reverse Convertibles (330)
Classification according to the SVSP Swiss Derivative Map 2010: Reverse Convertibles (1220)

Value

the price (scalar or vector) of the Reverse Convertible

Author(s)

Stefan Wilhelm [e-mail]

References

SVSP Swiss Derivative Map http://www.svsp-verband.ch/map/

See Also

similar structures : ReverseConvertiblePlusPro,DiscountCertificate

Examples

##
ReverseConvertible(S=40, Cap=50, Time=1, r=0.045, r_d=0, sigma=0.4, 
  nominal=1000, coupon=0.14)

## payoff diagram
S <- seq(0, 100)
p <- ReverseConvertible(S, Cap=50, Time=1, r=0.045, r_d=0, sigma=0.4, 
  nominal=1000, coupon=0.14)
p2 <- ReverseConvertible(S, Cap=50, Time=0, r=0.045, r_d=0, sigma=0.4, 
  nominal=1000, coupon=0.14)
plot(S, p,  type="l", col="red", xlab="underlying price", 
  ylab="payoff", main="Reverse Convertible")
lines(S, p2, col="blue")
abline(v=50, lty=2, col="gray80")

Example output

Loading required package: fBasics
Loading required package: timeDate
Loading required package: timeSeries
Loading required package: fOptions


Rmetrics Package fOptions
Pricing and Evaluating Basic Options
Copyright (C) 2005-2014 Rmetrics Association Zurich
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Loading required package: fExoticOptions
[1] 86.03755

fCertificates documentation built on May 2, 2019, 5:50 p.m.