Compound

(OptionType, ModelStatistic, Asset, StrikeOption, StrikeUnderly, TimeOption, TimeExpire, Volatility, InterestRate, YieldRate, MarketPrice, TimeFormat, InterestType, YieldType)

Argument

Description

OptionType

Alphanumeric value indicating the type of option:

•Call_Call = 1 or "cc" (call option on a call option)

•Call_Put = 2 or "cp" (call option on a put option)

•Put_Call = 3 or "pc" (put option on a put option)

•Put_Put = 4 or "pp" (put option on a put option)

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

•UnderlyStrikeSensativity = 58

•UnderlyImpliedStrike = 59

•OptionStrikeSensativity = 60

•OptionImpliedStrike = 61

Asset

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

StrikeOption

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

StrikeUnderly

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

TimeOption

The time, expressed in either Days or Years (depending on the TimeFormat value), until the expiration of the compound option.

Must be: 0 < TimeOption < TimeExpire.

TimeExpire

Time, expressed in either Days or Years (depending on the TimeFormat value), until the expiration underlying option. 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.

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.

Calculate all of functions for a compound call on call option whose asset price 0.5 years from the compound option expiration date, 1 year from the underlying expiration option is $56. The exercise price of the compound call is $5, the exercise price of the underlying call is $40, the risk-free interest rate is 7% per annum, the yield rate is 4.5% per annum, and the annual volatility is 25%. All of the rates are considered continuous. So,

Input

Output

Variable

Value

Function

Name

Value

OptionType

1 (Call on Call)

1

Theoretical:

11.908645

Asset

56

2

Delta:

0.872395

StrikeOption

5

3

Gamma:

0.013484

StrikeUnderly

40

4

Theta:

-0.004683

TimeOption

0.5

5

Implied Vol.:

0.261459

TimeExpire

1

6

Vega:

0.076747

Volatility

25%

7

Rho:

0.347082

InterestRate

7%

8

Psi:

-0.488541

YieldRate

4.5%

9

Lambda:

4.102409

MarketPrice

12

58

StrikeSensUnderly:

-0.811772

TimeFormat

Years

59

ImpliedStrikeUnderly:

39.887633

60

StrikeSensOption:

-0.894921

61

ImpliedStrikeOption:

4.898062

Chooser

Complex Chooser

Compound Binomial

Executive

Forward Start

Time Switch

Writer Extendible