Documentation Center

  • Trial Software
  • Product Updates

optstockbybls

Price options using Black-Scholes option pricing model

Syntax

Price = optstockbybls(RateSpec, StockSpec, Settle, Maturity,
OptSpec, Strike)

Arguments

RateSpec

The annualized continuously compounded rate term structure. For information on the interest rate specification, see intenvset.

StockSpec

Stock specification. See stockspec.

Settle

NINST-by-1 vector of settlement or trade dates.

Maturity

NINST-by-1 vector of maturity dates.

OptSpec

NINST-by-1 cell array of strings 'call' or 'put'.

Strike

NINST-by-1 vector of strike price values.

Description

Price = optstockbybls(RateSpec, StockSpec, Settle, Maturity,
OptSpec, Strike)

Price is a NINST-by-1 vector of expected option prices.

    Note:   When using StockSpec with optstockbybls, you can modify StockSpec to handle other types of underliers when pricing instruments that use the Black-Scholes model.

    When pricing Futures (Black model), enter the following in StockSpec:

    DivType = 'Continuous'; 
    DivAmount = RateSpec.Rates;

    When pricing Foreign Currencies (Garman-Kohlhagen model), enter the following in StockSpec:

    DivType = 'Continuous'; 
    DivAmount = ForeignRate; 

    where ForeignRate is the continuously compounded, annualized risk free interest rate in the foreign country.

Examples

expand all

Compute Option Prices Using the Black-Scholes Option Pricing Model

This example shows how to compute option prices using the Black-Scholes option pricing model. Consider two European options, a call and a put, with an exercise price of $29 on January 1, 2008. The options expire on May 1, 2008. Assume that the underlying stock for the call option provides a cash dividend of $0.50 on February 15, 2008. The underlying stock for the put option provides a continuous dividend yield of 4.5% per annum. The stocks are trading at $30 and have a volatility of 25% per annum. The annualized continuously compounded risk-free rate is 5% per annum. Using this data, compute the price of the options using the Black-Scholes model.

Strike = 29;
AssetPrice = 30;
Sigma = .25;
Rates = 0.05;
Settle = 'Jan-01-2008';
Maturity = 'May-01-2008';

% define the RateSpec and StockSpec
RateSpec = intenvset('ValuationDate', Settle, 'StartDates', Settle, 'EndDates',...
Maturity, 'Rates', Rates, 'Compounding', -1);

DividendType = {'cash';'continuous'};
DividendAmounts = [0.50; 0.045];
ExDividendDates = {'Feb-15-2008';NaN};

StockSpec = stockspec(Sigma, AssetPrice, DividendType, DividendAmounts,...
ExDividendDates);

OptSpec = {'call'; 'put'};

Price = optstockbybls(RateSpec, StockSpec, Settle, Maturity, OptSpec, Strike)
Price =

    2.2030
    1.2025

See Also

| | |

Was this topic helpful?