ForeignEquity

(OptionType, CurrencyType, ModelStatistic, Asset, Strike, ExchangeRate, TimeExpire, VolAsset, VolExch, InterestRate, YieldRate, Correlation, MarketPrice, TimeFormat, InterestType, YieldType)

Argument

Description

OptionType

Alphanumeric value indicating the type of option:

•Call = 1 or "c" (case insensitive)

•Put = 2 or "p" (case insensitive)

CurrencyType

Alphanumeric value indicating the which currency type to value the option in:

•Domestic = 1 or "d" (case insensitive)

•Foreign = 2 or "f" (case insensitive)

ModelStatistic

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

•Theoretical = 1

•Delta = 2

•Gamma = 3

•Theta = 4

•Rho = 7

•Psi = 8

•Lambda = 9

•StrikeSensitivity = 11

•ImpliedStrike = 13

•Chi = 48

•ImpliedCorr = 50

•AssetImpliedVol = 51 (Implied Volatility of the underlying asset)

•ExchangeImpliedVol = 52 (Implied Volatility of the exchange rate)

•ExchangeSensitivity = 55 (Sensitivity to a change in the exchange rate)

•AssetVega = 56 (Vega of the asset price's volatility)

•ExchangeVega = 57  (Vega of the exchange rate's volatility)

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.

ExchangeRate

The spot exchange rate. For options valued in domestic currency, it is specified in units of domestic currency per unit of foreign currency. For options valued in foreign currency, it is specified in units of foreign currency per unit of domestic currency.

TimeExpire

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

VolAsset

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

VolExch

Annualized volatility of the exchange rate. Must be > 0.

InterestRate

Risk-free domestic 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.

Correlation

The correlation between the underlying asset price and the exchange rate. Must be -1 < Correlation < 1.

MarketPrice

Optional. The selling price of the option in the marketplace. This input is required when any implied value is 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.

Calculate all of functions for a foreign equity call option whose asset price 68 days from expiration is $59, the exercise price is $60, the exchange rate is $1.25, the risk-free interest rate is 8% per annum, the yield rate is 6% per annum, the annual volatility of the asset is 30%, the annual volatility of the exchange is 25%, and the correlation between the asset price and the currency rate is 0.25. All of the rates are considered continuous. So,

Input

Output

Variable

Value

Function

Name

Domestic

Foreign

OptionType

Call

1

Theoretical:

14.635792

0.215742

Asset

59

2

Delta:

1.096392

0.061011

Strike

60

3

Gamma:

0.021351

0.013941

ExchangeRate

1.25

4

Theta:

-0.019680

-0.007795

TimeExpire

68

7

Rho:

0.093246

0.006304

VolAsset

30%

8

Psi:

-0.120513

-0.006706

VolExch

25%

9

Lambda:

4.419792

16.684936

InterestRate

8%

11

Strike Sens:

-0.834189

-0.056398

YieldRate

6%

13

Implied Strike:

60.163114

59.925190

Correlation

0.25

48

Chi:

1.038424

-0.678085

TimeFormat

Days

50

Implied Corr:

0.118227

0.243741

MarketPrice (Domestic)

14.5

51

Implied Vol. A:

0.271626

0.301968

MarketPrice(Foreign)

0.22

52

Implied Vol. E:

0.218017

0.252662

55

Exchange Sens:

51.749725

-2.707119

56

Vega Vol. A:

0.050191

0.021473

57

Vega Vol. E:

0.044998

0.015822

Equity Linked FX

Quanto

Takeover Foreign Exchange