TwoAssetCorr

(OptionType, ModelStatistic, Asset1, Asset2, Strike1. Strike2, TimeExpire, Volatility1, Volatility2, InterestRate, YieldRate1, YieldRate2, Correlation, MarketPrice, TimeFormat, InterestType, Yield1Type, Yield2Type)

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

•Theta = 4

•Rho = 7

•Delta1 = 30

•Delta2 = 31

•Gamma1 = 32

•Gamma2 = 33

•ImpliedVol1 = 34

•ImpliedVol2 = 35

•Vega1 = 36

•Vega2 = 37

•Psi1 = 38

•Psi2 = 39

•Lambda1 = 42

•Lambda2 = 43

•StrikeSens1 = 44

•ImpliedStrike1 = 45

•StrikeSens2 = 46

•ImpliedStrike2 = 47

•Chi = 48

•ImpliedCorrelation = 50

Asset1

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

Asset2

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

Strike1

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

Strike2

The price at which the asset two 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.

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 a two-asset correlation call where the option is 75 days from expiration, the first asset price is $96, the second asset price is $104, the first exercise price is $95, the second exercise price is $100, the risk-free interest rate is 6% per annum, the yield rate of the first and second assets are both 3% per annum, the correlation is 0.4, the annual volatility of the first asset is 30%, and the annual volatility of the second asset is 25%. All rates are considered continuous and the quantities are set to 1. So,

Input

Output

Variable

Value

Function

Name

Value

OptionType

Call

1

Theoretical:

5.023962

Asset1:

96

4

Theta:

-0.022414

Asset2:

104

7

Rho:

0.119584

Strike1:

95

30

Delta Asset 1:

0.202196

Strike2:

100

31

Delta Asset 2:

0.421254

TimeExpire

75

32

Gamma 1:

-0.010312

Volatility1:

30%

33

Gamma 2:

0.014057

Volatility2:

25%

34

Implied Vol. 1:

0.314717

InterestRate

6%

35

Implied Vol. 2:

0.248132

YieldRate1:

3%

36

Vega Vol. 1:

-0.016747

YieldRate2:

3%

37

Vega Vol. 2:

0.128356

Correlation:

0.4

38

Psi Yield 1:

-0.039885

MarketPrice:

5

39

Psi Yield 2:

-0.090021

TimeFormat

Days

42

Lambda 1:

3.863651

43

Lambda 2:

8.720298

44

Strike Sens 1:

-0.204325

45

Implied Strike 1:

95.117063

46

Strike Sens 2:

-0.387865

47

Implied Strike 2:

100.061855

48

Chi:

3.141151

50

Implied Corr:

0.392371

Dual Strike

Exchange

Exchange Binomial

Exchange on Exchange

Portfolio

Rainbow

Rainbow Binomial

Spread

Spread Binomial