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Great work, thanks for posting this, Anthony.
Two questions.
1) Is it ok to modify the "max" value of the underlying price and
strike parameters to allow analyzing index options (SPX, NDX). For
NDX the max value would have to be set at 5000 (in case it ever goes
that far).
2) Is it ok to modify the "max" value of Days2Exp to allow analyzing
leaps? The value of 800 (just over 3 years) would be needed.
I've never gone any deeper into the pricing formula and I'm not sure
if there are some extra adjustments done for index options and for
leaps.
Regards,
Lesmond
--- In amibroker@xxxxxxxxxxxxxxx, "Anthony Faragasso" <ajf1111@xxxx>
wrote:
> //BLACK SHCOLES OPTION PRICING FORMULA
>
> //coded by Anthony Faragasso
>
> //1-01-03
>
> // User Variables
>
>
> StockPrice = Param("stockPrice",81,1,200,1); //Stock Price
>
> Timedays = Param("DaysToExpire",30,1,300,1); //Time to expiry (
days to
> exp/365 )
>
> StrikePrice = Param("StrikePrice",75,1,300,1); //strike Price of
Option to
> evaluate
>
> InterestRate= Param("InterestRate",0.06,0.01,0.11,0.001);
//prevailing
> interest rate
>
> VKnown =Param("Volatility",0.30,0.10,0.50,0.001);//You can insert
Known
> volatility here , Implied Volatility.
>
> //////////////////////////////////////////////////////
>
> time=timedays/365;// days to expire conversion formula
>
>
>
> //Formula variables below
>
> /*************************************************/
>
> // Solves for ( X )
>
> x = (ln(stockPrice/strikePrice) + (interestrate +
> Vknown*Vknown/2)*time)/(Vknown*sqrt(time));
>
> /*************************************************/
>
> P = 0.2316419;
>
> bb1 = 0.31938153;
>
> bb2 = -0.3565638;
>
> bb3 = 1.78147794;
>
> bb4 = -1.821256;
>
> bb5 = 1.33027443;
>
> pi = 3.141592654; // PI
>
> A2 = 1/sqrt(2*pi);
>
> A3 = exp(-(x^2)/2);
>
> y= a2*a3;
>
> A4 = exp(-interestrate*time);
>
> t1 = 1/(1+ P*x);
>
> A5=(bb1*t1)+(bb2*t1^2) +( bb3*t1^3)+(bb4*t1^4)+(bb5*t1^5);
>
> /************************************************************/
>
> //Standard Normal Distribution Function of ( x )
>
>
>
> N = 1- y *A5 ;
>
> /************************************************************/
>
> // Solves for ( X1 )
>
> X1=x-Vknown*sqrt(TIME);
>
> y1=1/sqrt(2*pi);
>
> N0=exp(-(x1^2)/2);
>
> T2=1/(1+ P*X1);
>
> A6=(bb1*t2)+(bb2*t2^2) +( bb3*t2^3)+(bb4*t2^4)+(bb5*t2^5);
>
> A7=exp(-interestrate*time);
>
> y2=y1*n0;
>
> /************************************************************/
>
> /* Standard Normal Distribution Function OF ( x1 )*/
>
> /***********************************************************/
>
> N2= 1-y2 * A6;
>
> /************ CALL OPTION FAIR VALUE************/
>
> Call = stockPrice * N - strikePrice * A4 * N2;
>
> /************ PUT OPTION FAIR VALUE*************/
>
> Put = Call - stockprice + strikeprice*A7;
>
>
> Filter = 1;
>
> SetOption("nodefaultcolumns",1);
>
> AddColumn(stockPrice,"AssetP",2.2);
>
> AddColumn(strikeprice,"StrikeP",1.2);
>
> AddColumn(InterestRate*100,"InterestRate%",1.2);
>
> AddColumn(VKnown*100,"Volatility%",1.2);
>
> AddColumn(timedays,"DaysToExpire ",1);
>
> AddColumn(Call,"Call FV",1.2);
>
> AddColumn(put,"Put FV",1.2);
>
> //Notes
>
> /* AA window
>
> 1. Select current symbol ( could be any stock, output is not
associated
>
> with the current stock).
>
> 2. n last quotations
>
> 3. n = 1
>
> 4. Use the Parameters button to make user selections
>
> 5. Click explore */
>
>
>
> --
> No virus found in this outgoing message.
> Checked by AVG Anti-Virus.
> Version: 7.0.308 / Virus Database: 266.7.4 - Release Date: 3/18/2005
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