MCSpreadOption.m

Monte Carlo Simulation Spread Options

Description

The MCSpreadOption function can be used for valuation of spread options Spread options are actively traded on New York Mercantile Exchange (NYMEX) on the difference/spread between different oil qualities. Spread options are also popular in many other markets.
 
Tested under MATLAB 5.3 on Windows 98

• MATLAB release: MATLAB 5.3 (R11)

[Lothar Schröder]

can you please send me the full code, i can not download it

thanks

lothar

[Chris Hsieh]

Well-written program. thanks for the sharing

[Dimitri Shvorob]

A rather trivial (a dozen lines, essentially, a few of those perfectly avoidable) and not too well-written (twelve input arguments? how about using a structure?) program, posted, it seems, to advertize the author's book. (Is it really the most accessible reference on spread options?)

 implements some

[Wes Devauld]

The For loop can be replaced with:

---Code Start
   Epsilon1 = normrnd(zeros(nSimulations,1),1);
   Epsilon2 = rho * Epsilon1 + normrnd(zeros(nSimulations,1),1) ...
               .* sqrt(ones(nSimulations,1) - rho ^ 2);
   St1 = S1 * exp(Drift1 + v1Sqrdt * Epsilon1);
   St2 = S2 * exp(Drift2 + v2Sqrdt * Epsilon2);
   price = exp(-r * T) * (sum(max(z * (St1 - St2 - X), 0)) / nSimulations);
---Code End