This example shows how to compute the price of supershare digital options using Black-Scholes model. Consider a supershare based on a portfolio of nondividend paying stocks with a lower strike of 350 and an upper strike of 450. The value of the portfolio on November 1, 2008 is 400. The risk-free rate is 4.5% and the volatility is 18%. Using this data, calculate the price of the supershare option on February 1, 2009.
Interest-rate term structure (annualized and continuously compounded),
specified by the RateSpec obtained from intenvset. For
information on the interest-rate specification, see intenvset.
Data Types: struct
StockSpec — Stock specification for underlying asset structure
Stock specification for the underlying asset. For information on the stock
specification, see stockspec.
stockspec handles several
types of underlying assets. For example, for physical commodities the price
is StockSpec.Asset, the volatility is
StockSpec.Sigma, and the convenience yield is
StockSpec.DividendAmounts.
Data Types: struct
Settle — Settlement or trade date serial date number | date character vector
Settlement or trade date for the basket option, specified as an
NINST-by-1 vector of serial date
numbers or date character vectors.
Data Types: double | char | cell
Maturity — Maturity date serial date number | date character vector
Maturity date for the basket option, specified as an
NINST-by-1 vector of serial date
numbers or date character vectors.
Data Types: double | char | cell
StrikeLow — Low strike price values vector
Low strike price values, specified as an
NINST-by-1 vector.
Data Types: double
StrikeHigh — High strike price values vector
High strike price values, specified as an
NINST-by-1 vector.
A supershare option pays out a proportion
of the assets underlying a portfolio if the asset lies between a lower and an upper
bound at the expiry of the option.
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