Functions and CALL Routines |
Category: | Financial |
Syntax | |
Arguments | |
Details | |
Comparisons | |
Examples | |
See Also |
Syntax |
MARGRCLPRC(X_{1}, t, X_{2}, sigma1, sigma2, rho12) |
is a non-missing, positive value that specifies the price of the first asset.
Requirement: | Specify X_{1} and X_{2} in the same units. |
is a non-missing value that specifies the time to expiration.
is a non-missing, positive value that specifies the price of the second asset.
Requirement: | Specify X_{2} and X_{1} in the same units. |
is a non-missing, positive fraction that specifies the volatility of the first asset.
Requirement: | sigma1 must be for the same time period as the unit of t. |
is a non-missing, positive fraction that specifies the volatility of the second asset.
Requirement: | Specify a value for sigma2 for the same time period as the unit of t. |
specifies the correlation between the first and second assets, .
Range: | between -1 and 1 |
Details |
The MARGRCLPRC function calculates the call price for European options on stocks, based on the Margrabe model. The function is based on the following relationship:
where
X_{1} |
specifies the price of the first asset. |
X_{2} |
specifies the price of the second asset. |
N |
specifies the cumulative normal density function. |
where
t |
specifies the time to expiration. |
specifies the variance of the first asset. | |
specifies the variance of the second asset. | |
specifies the volatility of the first asset. | |
specifies the volatility of the second asset. | |
specifies the correlation between the first and second assets. |
For the special case of t=0, the following equation is true:
Note: This function assumes that there are no dividends from the two assets.
For information about the basics of pricing, see Using Pricing Functions.
Comparisons |
The MARGRCLPRC function calculates the call price for European options on stocks, based on the Margrabe model. The MARGRPTPRC function calculates the put price for European options on stocks, based on the Margrabe model. These functions return a scalar value.
Examples |
See Also |
Functions: |
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