asianbyhhm

Price European discrete arithmetic fixed Asian options using Haug, Haug, Margrabe model

Description

example

Price = asianbyhhm(RateSpec,StockSpec,OptSpec,Strike,Settle,ExerciseDates) prices European discrete arithmetic fixed Asian options using the Haug, Haug, Margrabe model.

example

Price = asianbyhhm(___,Name,Value) adds optional name-value pair arguments.

Examples

collapse all

Define the Asian option parameters.

AssetPrice = 100;
Strike = 95;
Rates = 0.1;
Sigma = 0.15;
Settle = 'Apr-1-2013';
Maturity = 'Oct-1-2013';

Create a RateSpec using the intenvset function.

 RateSpec = intenvset('ValuationDate', Settle, 'StartDates', Settle, 'EndDates', ...
 Maturity, 'Rates', Rates, 'Compounding', -1, 'Basis', 1);

Create a StockSpec for the underlying asset using the stockspec function.

DividendType = 'Continuous';
DividendAmounts = 0.05;

StockSpec = stockspec(Sigma, AssetPrice, DividendType, DividendAmounts);

Calculate the price of the Asian option using the Haug, Haug, Margrabe approximation. Assume that the averaging period has started before the Settle date.

OptSpec = 'Call';
ExerciseDates = 'Oct-1-2013';
NumFixings = 12;
AvgDate = 'Jan-1-2013';
AvgPrice = 100;

Price = asianbyhhm(RateSpec, StockSpec, OptSpec, Strike, Settle, ExerciseDates, ...
'NumFixings', NumFixings, 'AvgDate', AvgDate, 'AvgPrice', AvgPrice)
Price = 5.8216

Define the Asian option parameters.

AssetPrice = 100;
Strike = 95;
Rates = 0.1;
Sigma = 0.15;
Settle = 'Apr-1-2013';
Maturity = 'Oct-1-2013';

Create a RateSpec using the intenvset function.

 RateSpec = intenvset('ValuationDate', Settle, 'StartDates', Settle, 'EndDates', ...
 Maturity, 'Rates', Rates, 'Compounding', -1, 'Basis', 1);

Create a StockSpec for the underlying asset using the stockspec function.

DividendType = 'Continuous';
DividendAmounts = 0.05;

StockSpec = stockspec(Sigma, AssetPrice, DividendType, DividendAmounts);

Calculate the price of the Asian option using the Haug, Haug, Margrabe approximation. Assume that the averaging period starts after the Settle date.

OptSpec = 'Call';
ExerciseDates = 'Oct-1-2013';
NumFixings = 15;
AvgDate = 'Jan-1-2013';

Price = asianbyhhm(RateSpec,StockSpec,OptSpec,Strike,Settle,ExerciseDates, ...
'NumFixings',NumFixings,'AvgDate',AvgDate)
Price = 1.3785e-07

Input Arguments

collapse all

Interest-rate term structure (annualized and continuously compounded), specified by the RateSpec obtained from intenvset. For information on the interest-rate specification, see intenvset.

Data Types: struct

Stock specification for underlying asset, specified using StockSpec obtained from stockspec. For information on the stock specification, see stockspec.

stockspec can handle other types of underlying assets. For example, stocks, stock indices, and commodities. If dividends are not specified in StockSpec, dividends are assumed to be 0.

Data Types: struct

Definition of option, specified as 'call' or 'put' using a character vector, cell array of character vectors, or string array.

Data Types: char | cell | string

Option strike price value, specified with a nonnegative integer using a NINST-by-1 vector of strike price values.

Data Types: double

Settlement date or trade date for the Asian option, specified as a NINST-by-1 vector using serial date numbers, date character vectors, datetime, or string arrays.

Data Types: double | char | datetime | string

European option exercise dates, specified as a NINST-by-1 vector using serial date numbers, date character vectors, datetimes, or string arrays.

Note

For a European option, there is only one ExerciseDates on the option expiry date.

Data Types: double | char | datetime | string

Name-Value Pair Arguments

Specify optional comma-separated pairs of Name,Value arguments. Name is the argument name and Value is the corresponding value. Name must appear inside quotes. You can specify several name and value pair arguments in any order as Name1,Value1,...,NameN,ValueN.

Example: Price = asianbyhhm(RateSpec,StockSpec,OptSpec,Strike,Settle,ExerciseDates,'NumFixings',15)

Average price of underlying asset at the Settle date, specified as the comma-separated pair consisting of 'AvgPrice' and a NINST-by-1 vector.

Note

Use the AvgPrice argument when AvgDate < Settle.

Data Types: double

Date averaging period begins, specified as the comma-separated pair consisting of 'AvgDate' and a NINST-by-1 vector using serial date numbers, date character vectors, datetimes, or string array.

Data Types: char | double | datetime | string

Total number of fixings or averaging points, specified as the comma-separated pair consisting of 'NumFixings' and a NINST-by-1 vector.

Data Types: double

Output Arguments

collapse all

Expected prices for fixed Asian options, returned as a NINST-by-1 vector.

More About

collapse all

Asian Option

An Asian option is a path-dependent option with a payoff linked to the average value of the underlying asset during the life (or some part of the life) of the option.

Asian options are similar to lookback options in that there are two types of Asian options: fixed (average price option) and floating (average strike option). Fixed Asian options have a specified strike, while floating Asian options have a strike equal to the average value of the underlying asset over the life of the option. For more information, see Asian Option.

References

[1] Haug, E. G. The Complete Guide to Option Pricing Formulas. McGraw-Hill Education, 2007.

Introduced in R2018a