Writer Extendible Function |
  
|
Writer Extendible Function |
|
The WriterExtendible function calculates the theoretical price, sensitivities, the implied volatility, and the implied strike value of a European style writer extendible option using Longstaff’s model. See Multiple Exercise Options for a further explanation.
WriterExtendible |
(OptionType, ModelStatistic, Asset, StrikeInitial, StrikeExtended, TimeInitial, TimeExtended, Volatility, InterestRate, YieldRate, MarketPrice, TimeFormat) |
Note: Optional arguments are shown in Italics. MarketPrice is not Optional for the Implied Calculations.
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 •Delta = 2 •Gamma = 3 •Theta = 4 •ImpliedVol = 5 •Vega = 6 •Rho = 7 •Psi = 8 •Lambda = 9 •InitialStrikeSensativity = 18 •InitialImpliedStrike = 19 •ExtendedStrikeSensativity = 20 •ExtendedImpliedStrike = 21 |
Asset |
The price of the underlying asset. Must be > 0. |
StrikeInitial |
The strike price of the initial option. Must be > 0. |
StrikeExtended |
The strike price of the extended option. Must be > 0. |
TimeInitial |
Time, expressed in either Days or Years (depending on the TimeFormat value), until the initial expiration of the option. Must be > 0. |
TimeExtended |
Time, expressed in either Days or Years (depending on the TimeFormat value), until the extended expiration of the 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. 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. |
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) |
Example
Calculate all of functions for a writer extendible call option with the original time to expiration 80 days, which will be extended 80 days if the option is out-of-the money at the original time. The asset price is $38 and the initial exercise price is $40. If the option is extended the price is adjusted to $50. The risk-free interest rate is 6% per annum, the yield rate is 4% per annum, and the annual volatility is 30%. So, |
Input |
|
Output |
|||
Variable |
Value |
|
Function |
Name |
Value |
OptionType |
Call |
|
1 |
Theoretical: |
1.396428 |
Asset |
38 |
|
2 |
Delta: |
0.392833 |
StrikeInitial |
40 |
|
3 |
Gamma: |
0.070835 |
StrikeExtended |
50 |
|
4 |
Theta: |
-0.013200 |
TimeInitial |
80 |
|
5 |
Implied Vol.: |
0.314363 |
TimeExtended |
160 |
|
6 |
Vega: |
0.071693 |
Volatility |
30% |
|
7 |
Rho: |
0.030536 |
InterestRate |
6% |
|
8 |
Psi: |
-0.033646 |
YieldRate |
4% |
|
9 |
Lambda: |
10.689896 |
MarketPrice |
1.5 |
|
18 |
Initial Strike Sens: |
-0.328257 |
TimeFormat |
Days |
|
19 |
Initial Implied Strike: |
39.694241 |
|
|
|
20 |
Extended Strike Sens: |
-0.008019 |
|
|
|
21 |
Extended Implied Strike: |
44.859197 |
For a further example on this model see the included Excel Template located in the root directory of the add-in. This example can be accessed through the Multiple Exercise Template menu item after the add-in has been installed properly.
A list of all of the possible Error Messages is included for convenience.