Spread

(OptionType, ModelStatistic, Asset1, Asset2, Strike, TimeExpire, Volatility1, Volatility2, InterestRate, YieldRate1, YieldRate2, Correlation, QtyAsset1, QtyAsset2, 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

•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

•ImpliedCorrelation = 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.

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 a European style spread call option where the option is 180 days from expiration. The first asset price is $95, the second asset price is $89, the exercise price is $10, the risk-free interest rate is 8% per annum, the yield rate of the first and second assets are both 7% per annum, the correlation is 0.5, the annual volatility of the first asset is 25%, and the annual volatility of the second asset is 20%. All rates are considered continuous and the quantities are set to 1. So,

Input

Output

Variable

Value

Function

Name

Value

OptionType

Call

1

Theoretical:

4.143476

Asset1:

95

4

Theta:

-0.014996

Asset2:

89

7

Rho:

0.017987

Strike:

10

11

Strike Sensitivity:

-0.364732

TimeExpire

180

13

Implied Strike:

10.398598

Volatility1:

25%

30

Delta Asset 1:

0.413641

Volatility2:

20%

31

Delta Asset 2:

-0.353989

InterestRate

8%

32

Gamma 1:

0.025452

YieldRate1:

7%

33

Gamma 2:

0.023411

YieldRate2:

7%

34

Implied Vol. 1:

0.241985

Correlation:

0.5

35

Implied Vol. 2:

0.114090

QtyAsset1

1

36

Vega Vol. 1:

0.181410

QtyAsset2

1

37

Vega Vol. 2:

0.055675

MarketPrice:

4

38

Psi Yield 1:

-0.193788

TimeFormat

Days

39

Psi Yield 2:

0.155367

42

Lambda 1:

9.483791

43

Lambda 2:

-7.603535

48

Chi:

-5.087923

50

Implied Corr:

0.527862

Dual Strike

Exchange

Exchange Binomial

Exchange on Exchange

Portfolio

Rainbow

Rainbow Binomial

Spread Binomial

Two Asset Correlation