QuotientBS function

Quotient option valuation via Black-Scholes (BS) model

Quotient Option via Black-Scholes (BS) model

QuotientBS(o = OptPx(Opt(Style = "Quotient")), I1 = 100, I2 = 100,
  g1 = 0.04, g2 = 0.03, sigma1 = 0.18, sigma2 = 0.15, rho = 0.75)

Arguments

• o: An object of class OptPx
• I1: A spot price of the underlying security 1 (usually I1)
• I2: A spot price of the underlying security 2 (usually I2)
• g1: Payout rate of the first stock
• g2: Payout rate of the 2nd stock
• sigma1: a vector of implied volatilities for the associated security 1
• sigma2: a vector of implied volatilities for the associated security 2
• rho: is the correlation between asset 1 and asset 2

Returns

A list of class QuotientBS consisting of the original OptPx object and the option pricing parameters I1,I2, Type, isForeign, and isDomestic

as well as the computed price PxBS.

Examples

(o = QuotientBS())$PxBS

o = OptPx(Opt(Style = 'Quotient', Right = "Put"), r= 0.05)
(o = QuotientBS(o, I1=100, I2=100, g1=0.04, g2=0.03, sigma1=0.18,sigma2=0.15, rho=0.75))$PxBS

o = OptPx(Opt(Style = 'Quotient',  Right = "Put", ttm=1, K=1), r= 0.05)
QuotientBS(o, I1=100, I2=100, g1=0.04, g2=0.03, sigma1=0.18,sigma2=0.15, rho=0.75)

o = OptPx(Opt(Style = 'Quotient',  Right = "Call", ttm=1, K=1), r= 0.05)
QuotientBS(o, I1=100, I2=100, g1=0.04, g2=0.03, sigma1=0.18,sigma2=0.15, rho=0.75)

Author(s)

Chengwei Ge, Department of Statistics, Rice University, Spring 2015

References

Zhang Peter G., Exotic Options, 2nd, 1998. http://amzn.com/9810235216.