Executive Function

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Executive Function

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The Executive function calculates the theoretical price, sensitivities, the implied volatility, and the implied strike value of a European style executive option using Jennergren and Naslund’s model. See Multiple Exercise Options for a further explanation.

 

 

Executive

(OptionType, ModelStatistic, Asset, Strike, TimeExpire, Volatility, InterestRate, YieldRate, JumpRate, MarketPrice, TimeFormat, InterestType, YieldType)

Note: Optional arguments are shown in Italics. MarketPrice is not Optional for the Implied Calculations.

 

 

Argument

Description

OptionType

Alphanumeric value indicating the type of option:

Call = 1 or "c" (case insensitive)

Put = 2 or "p" (case insensitive)

ModelStatistic

Numeric value indicating the type of function required for the return value:

Theoretical = 1

Delta = 2

Gamma = 3

Theta = 4

ImpliedVol = 5

Vega = 6

Rho = 7

Psi = 8

Lambda = 9

StrikeSensitivity = 11

ImpliedStrike = 13

Asset

The price of the underlying asset. Must be > 0.

Strike

The price at which the asset can be purchased if the option is a call or sold if the option is a put. Must be > 0.

TimeExpire

Time, expressed in either Days or Years (depending on the TimeFormat value), until the options expiration. Must be > 0.

Volatility

Annualized volatility of the underlying security. Must be > 0.

InterestRate

Risk-free interest rate expressed as a percentage. This rate is interpreted as a continuously compounded rate unless otherwise specified in the InterestType argument. Must be > 0.

YieldRate

Yield, expressed as a percentage (dividends or interest yield), of the underlying asset price. This rate is interpreted as a continuously compounded rate unless specified otherwise in the YieldType argument.

JumpRate

The jump rate per year. Must be >= 0.

MarketPrice

Optional. The selling price of the option in the marketplace. This input is required when implied volatility and strike are calculated. Price must be > 0.

TimeFormat

Optional. Alphanumeric value indicating the format of the time arguments (i.e. TimeExpire). If omitted, Days are used as the default. Specified as either:

Days = 0 or "D" (case insensitive)

Years = 1 or "Y" (case insensitive)

InterestType

Optional. Alphanumeric value indicating the type of InterestRate to use when evaluating the option. This value is converted to Continuously Compounded for the calculations. If omitted, a Continuously Compounded rate is used.

YieldType

Optional. Alphanumeric value indicating the type of YieldRate to use when evaluating the option. This value is converted to Continuously Compounded for the calculations. If omitted, a Continuously Compounded rate is used.

 

 

Example

Calculate all of functions for an executive call option whose asset price 2 years from expiration is $74.5. The exercise price is $65, the risk-free interest rate is 7% per annum, the yield rate is 5% per annum, the jump rate per year is 20%, and the annual volatility is 25%. All of the rates are considered continuous. So,

 

Input

 

Output

Variable

Value

 

Function

Name

Value

OptionType

Call

 

1

Theoretical:

10.182782

Asset

74.5

 

2

Delta:

0.455140

Strike

65

 

3

Gamma:

0.007311

TimeExpire

2

 

4

Theta:

0.002200

Volatility

25%

 

5

Implied Vol.:

0.240954

InterestRate

7%

 

6

Vega:

0.202898

YieldRate

5%

 

7

Rho:

0.474503

JumpRate

20%

 

8

Psi:

-0.678159

MarketPrice

10

 

9

Lambda:

3.329928

TimeFormat

Years

 

11

Strike Sensitivity:

-0.365002

 

 

 

13

Implied Strike:

65.504110

 

 

See Also

Chooser

Complex Chooser

Compound

Compound Binomial

Forward Start

Time Switch

Writer Extendible

 

 

Remark

For a further example on this model see the included Excel Template located in the root directory of the add-in. This example can be accessed through the Multiple Exercise Template menu item after the add-in has been installed properly.

 

A list of all of the possible Error Messages is included for convenience.