derivmkts (version 0.2.5)

perpetual: Perpetual American options

Description

callperpetual and putperpetual compute prices of perpetual American options. The functions optionally return the exercise barriers (the prices at which the options are optimally exercised).

Usage

callperpetual(s, k, v, r, d, showbarrier)
putperpetual(s, k, v, r, d, showbarrier)

Arguments

s

Price of the underlying asset

k

Strike price

v

Volatility of the asset price, defined as the annualized standard deviation of the continuously-compounded return

r

Annual continuously-compounded risk-free interest rate

d

Dividend yield, annualized, continuously-compounded

showbarrier

Boolean (FALSE). If TRUE, the option price and exercise barrier are returned as a list

Value

Option price, and optionally the optimal exercise barrier.

Details

Returns a scalar or vector of option prices, depending on the inputs

callperpetual(s, k, v, r, tt, d)

Examples

# NOT RUN {
s=40; k=40; v=0.30; r=0.08;  d=0.02;
callperpetual(s, k, v, r, d)

putperpetual(s, c(35, 40, 45), v, r, d, showbarrier=TRUE)


# }