RainbowBin

(ExerciseType, OptionType, ExtremeType, ModelStatistic, Asset1, Asset2, Strike, TimeExpire, Volatility1, Volatility2, InterestRate, YieldRate1, YieldRate2, Correlation, Iterations, QtyAsset1, QtyAsset2, MarketPrice, TimeFormat, InterestType, Yield1Type, Yield2Type)

Argument

Description

ExerciseType

Alphanumeric value indicating the exercise type:

•American = 0 or "a" (case insensitive)

•European = 1 or "e" (case insensitive)

OptionType

Alphanumeric value indicating the type of option:

•Call = 1 or "c" (case insensitive)

•Put = 2 or "p" (case insensitive)

ExtremeType

Alphanumeric value indicating the barrier type:

•MaxAsset = 1 or "max" (case insensitive)

•MinAsset = 2 or "min" (case insensitive)

ModelStatistic

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

•Theoretical = 1

•Theta = 4

•Rho = 7

•StrikeSensitivity = 11

•ImpliedStrike = 13

•Delta1 = 30

•Delta2 = 31

•Gamma1 = 32

•Gamma2 = 33

•ImpliedVol1 = 34

•ImpliedVol2 = 35

•Vega1 = 36

•Vega2 = 37

•Psi1 = 38

•Psi2 = 39

•Lambda1 = 42

•Lambda2 = 43

•Chi = 48

•ImpliedCorr = 50

Asset1

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

Asset2

The price of the underlying asset two. 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.

Volatility1

Annualized volatility of the asset one. Must be > 0.

Volatility2

Annualized volatility of the asset two. 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.

YieldRate1

Yield, expressed as a percentage (dividends or interest yield), of the first underlying asset price. This rate is interpreted as a continuously compounded rate unless specified otherwise in the Yield1Type argument.

YieldRate2

Yield, expressed as a percentage (dividends or interest yield), of the second underlying asset price. This rate is interpreted as a continuously compounded rate unless specified otherwise in the Yield2Type argument.

Correlation

The correlation between the first underlying asset price and the second underlying asset price.

Must be -1 < Correlation < 1.

Iterations

The number of iterations used for the model. Must be between 5 and 100. As the number of iterations increase, the time required for a calculation increases exponentially. Good results can be obtained with 30 iterations.

QtyAsset1

Optional. The quantity of asset one. If omitted, QtyAsset1=1.

QtyAsset1 must be > 0.

QtyAsset2

Optional. The quantity of asset two. If omitted, QtyAsset2=1.

QtyAsset2 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.

Yield1Type

Optional. Alphanumeric value indicating the type of YieldRate1 to use when evaluating the option. This value is converted to Continuously Compounded for the calculations. If omitted, a Continuously Compounded rate is used.

Yield2Type

Optional. Alphanumeric value indicating the type of YieldRate2 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 of an American style rainbow put on the minimum of two assets where the option is 90 days from expiration. The first asset price is $41.25, the second asset price is $44.75, the exercise price is $42, the risk-free interest rate is 6% per annum, the yield rate of the first and second assets are both 5% per annum, the correlation is 0.3, the annual volatility of the first asset is 25%, and the annual volatility of the second asset is 35%. All rates are considered continuous, the quantities are set to 1 and Iterations = 10. So,

Input

Output

Variable

Value

Function

Name

Value

ExerciseType

American

1

Theoretical:

3.367676

OptionType

Put

4

Theta:

-0.019336

ExtremeType

2 (MinAsset)

7

Rho:

-0.065661

Asset1:

41.25

11

Strike Sensitivity:

0.720634

Asset2:

44.75

13

Implied Strike:

42.183614

Strike:

42

30

Delta Asset 1:

-0.425120

TimeExpire

90

31

Delta Asset 2:

-0.209223

Volatility1:

25%

32

Gamma 1:

0.068367

Volatility2:

35%

33

Gamma 2:

0.037141

InterestRate

6%

34

Implied Vol. 1:

0.269396

YieldRate1:

5%

35

Implied Vol. 2:

0.372877

YieldRate2:

5%

36

Vega Vol. 1:

0.067882

Correlation:

0.3

37

Vega Vol. 2:

0.056702

Iterations

10

38

Psi Yield 1:

0.037325

QtyAsset1

1

39

Psi Yield 2:

0.021355

QtyAsset2

1

42

Lambda 1:

-5.207214

MarketPrice:

3.5

43

Lambda 2:

-2.780180

TimeFormat

Days

48

Chi:

-0.889369

50

Implied Corr:

0.156338

Dual Strike

Exchange

Exchange Binomial

Exchange on Exchange

Portfolio

Rainbow

Spread

Spread Binomial

Two Asset Correlation