Calculate price of supershare digital options using Black-Scholes model
Price = supersharebybls(RateSpec,StockSpec,Settle,Maturity,OptSpec,StrikeLow,StrikeHigh)
The annualized, continuously compounded rate term structure.
For information on the interest rate specification, see
Stock specification. See
Price = supersharebybls(RateSpec,StockSpec,Settle,Maturity,OptSpec,StrikeLow,StrikeHigh) computes
supershare digital option prices using the Black-Scholes model.
Price is a
of expected option prices.
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.
Settle = 'Nov-1-2008'; Maturity = 'Feb-1-2009'; Rates = 0.045; Basis = 1; Compounding = -1; % create the RateSpec RateSpec = intenvset('ValuationDate', Settle, 'StartDates', Settle,... 'EndDates', Maturity, 'Rates', Rates, 'Compounding', Compounding, 'Basis', Basis); % define the StockSpec AssetPrice = 400; Sigma = .18; StockSpec = stockspec(Sigma, AssetPrice); % define the high and low strike points StrikeLow = 350; StrikeHigh = 450; % calculate the price Pssh = supersharebybls(RateSpec, StockSpec, Settle, Maturity,... StrikeLow, StrikeHigh)
Pssh = 0.9411