DeferredPaymentLT function

DeferredPaymentLT

A binomial tree pricer of a Deferred Payment option. An American option that has payment at expiry no matter when exercise, causing differences in present value (PV) of a payoff.

DeferredPaymentLT(o = OptPx(Opt(Style = "DeferredPayment")))

Arguments

• o: An object of class OptPx

Returns

An object of class OptPx with price included

Examples

(o = DeferredPaymentLT())$PxLT

o = Opt(Style='DeferredPayment', Right="Call", S0=110,ttm=.5,K=110)
(o = DeferredPaymentLT(OptPx(o,r=.05,q=.04,vol=.2,NSteps=5)))$PxLT

o = Opt(Style='DeferredPayment', Right="Put", S0 = 50, ttm=2,K=47)
(o = DeferredPaymentLT(OptPx(o,r=.05,q=.04,vol=.25,NSteps=3)))$PxLT

Author(s)

Max Lee, Department of Statistics, Rice University, Spring 2015

References

Hull, J.C., Options, Futures and Other Derivatives, 9ed, 2014. Prentice Hall. ISBN 978-0-13-345631-8, http://www-2.rotman.utoronto.ca/~hull/ofod/index.html