oBIN2( ) - Variable Step BOPM Function

Component

Resolution - Vanilla Options

Function Definition

oBIN2(CallPut, ExerciseStyle, ValueDate, MaturityDate, Spot, Exercise, Volatility, RiskFree, Dividends, ExerciseDates, Steps, OutputFlag)

Calculates the option value using the variable-step binomial option pricing model (BOPM). Returns the option value and Greeks associated with the option (if requested).

Option Types

Suitable for Bermudan and American options with discrete dividends.

Function Parameters

Parameters

Description

Parameter Type

Restrictions

.

CallPut

Option type.

Enumerated Constant

1 - Call
2 - Put

ExerciseStyle

Exercise type of the option.

Enumerated Constant

1 - European
2 - American
3 - Bermudan

ValueDate

Valuation date of the option.

Date

ValDate < MatDate

MaturityDate

Maturity date of the option.

Date

MatDate > ValDate

Spot

Current market price of the underlying asset.

Double

Spot > 0

Exercise

Exercise price of the option.

Double

Exercise > 0

Volatility

Annualized volatility of the underlying asset, expressed as a decimal.

Double

Volatility > 0%

RiskFree

Risk free interest rate, entered as either a single rate (act/365) or as a user defined zero curve object.

Double or Curve

RiskFree >= 0%

Dividends

The dividend schedule or net cost of carry.

See dividends and carry definitions.

Double or Curve

If specified as a Curve, each dividend date must be unique.

ExerciseDates

Schedule of discrete dates on which the option can be exercised. Entered as a single column vector of dates.

Vector

Each Exercise Date must be unique.

Steps

The number of steps in the binomial tree. Although there is no upper limit, the speed of calculation will deteriorate for high step numbers.

Long

Steps >= 2

OutputFlag

Indicates which result, or set of results, will be displayed in the worksheet. When returning more than one value, the function must be entered as an array function.

Enumerated Constant

0 - Value & Greeks
1 - Value only
2 - Delta only
3 - Gamma only
4 - Theta only
5 - Vega only
6 - Rho only

In This Section

oBIN2( ) Model Definition

oBIN2( ) - Dividends and Carry Definitions

oBIN2( ) Example - Bermudan Put Option