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Foreign Exchange Options

version 1.0.0.0 (2.36 KB) by Rodolphe Sitter
Valuation of European and American options on foreign exchange using Garman-Kohlhagen model

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Updated 17 Apr 2009

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fxoptions( S0, X, rd, rf, T, vol, style)

Valuation of European and American call and put options on foreign exchange using Garman-Kohlhagen model.
European option prices are given by an exact formula (Garman-Kohlhagen).
American option prices are approximated using both binomial and trinomial trees.

Example:

Suppose that the spot price of the Canadian dollar is US $0.85 and that the CAD|USD exchange rate has a volatility of 4% per annum. The risk-free rates of interest in canada and the United States are 4% and 5% per annum, respectively.
The value of an American call option expiring in nine months that gives the holder the right to buy one Canadian dollar for 0.85 USD is:

>> fxoptions( .85, .85, 5/100, 4/100, 9/12, 4/100, 'a')

$0.014700 (Binomial Tree)
$0.014701 (Trinomial Tree)

Cite As

Rodolphe Sitter (2021). Foreign Exchange Options (https://www.mathworks.com/matlabcentral/fileexchange/23811-foreign-exchange-options), MATLAB Central File Exchange. Retrieved .

MATLAB Release Compatibility
Created with R2007b
Compatible with any release
Platform Compatibility
Windows macOS Linux
Acknowledgements

Inspired by: Kernel Smoothing Regression

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