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crrprice

Instrument prices from Cox-Ross-Rubinstein tree

Syntax

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

Arguments

CRRTree

Stock price 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 character vector for each instrument. For more information about how to create the InstSet structure, see instadd.

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', 'CBond', 'Lookback', 'OptStock'. See instadd to construct defined types.

Related single-type pricing functions are:

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)
%Table of instrument portfolio partially displayed:
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)

Related Examples

Introduced before R2006a

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