Financial Derivatives Toolbox™

crrprice - Instrument prices from CRR tree

Syntax

[Price, PriceTree] = crrprice(CRRTree, InstSet, Options)

Arguments

`CRRTree`	Interest-rate tree structure created by `crrtree`.
`InstSet`	Variable containing a collection of `NINST` instruments. Instruments are categorized by type; each type can have different data fields. The stored data field is a row vector or string for each instrument.
`Options`	(Optional) Derivatives pricing options structure created with `derivset`.

Description

[Price, PriceTree] = crrprice(CRRTree, InstSet, Options) computes stock option prices using a CRR binomial tree created with crrtree.

Price is a number of instruments (NINST)-by-1 vector of prices for each instrument. The prices are computed by backward dynamic programming on the stock tree. If an instrument cannot be priced, NaN is returned.

PriceTree is a MATLAB^® structure of trees containing vectors of instrument prices and a vector of observation times for each node.

PriceTree.PTree contains the prices.

PriceTree.tObs contains the observation times.

PriceTree.dObs contains the observation dates.

crrprice handles instrument types: 'Asian', 'Barrier', 'Compound', 'Lookback', 'OptStock'. See instadd to construct defined types.

Related single-type pricing functions are

asianbycrr: Price an Asian option from a CRR tree.
barrierbycrr: Price a barrier option from a CRR tree.
compoundbycrr: Price a compound option from a CRR tree.
lookbackbycrr: Price a lookback option from a CRR tree.
optstockbycrr: Price an American, Bermuda, or European option from a CRR tree.

Examples

Load the CRR tree and instruments from the data file deriv.mat. Price the barrier and lookback options contained in the instrument set.

load deriv.mat; 
CRRSubSet = instselect(CRRInstSet,'Type', ... 
{'Barrier', 'Lookback'}); 

instdisp(CRRSubSet)

Index Type OptSpec Strike Settle   ExerciseDates AmericanOpt BarrierSpec ...  
1     Barrier call 105   01-Jan-2003 01-Jan-2006 1           ui ...     
 
Index Type     OptSpec Strike Settle     ExerciseDates AmericanOpt Name   Quantity
2     Lookback call    115   01-Jan-2003 01-Jan-2006   0           Lookback1 7
3     Lookback call    115   01-Jan-2003 01-Jan-2007   0           Lookback2 9 
      
[Price, PriceTree] = crrprice(CRRTree, CRRSubSet)

Price =

   12.1272
    7.6015
   11.7772

PriceTree = 

    FinObj: 'BinPriceTree'
     PTree: {1x5 cell}
      tObs: [0 1 2 3 4]
      dObs: [731582 731947 732313 732678 733043]

You can use treeviewer to see the prices of these three instruments along the price tree.

treeviewer(PriceTree, CRRSubSet)

crrprice - Instrument prices from CRR tree

Syntax

Arguments

Description

Examples

See Also