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MathGroup Archive 2010

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financialderivative with function of price

  • To: mathgroup at smc.vnet.net
  • Subject: [mg114592] financialderivative with function of price
  • From: r_poetic <radford.schantz at mms.gov>
  • Date: Thu, 9 Dec 2010 06:02:31 -0500 (EST)

Hello,
This little example seems to demonstrate that the current price and
strike price inputs of financial deriviative functions can be
functions of a r.v. Have I interpreted this correctly? (What this is
driving at is using the financial derivative functions for real
options.)

npv[x_]:=5*x-20
(*x means price, a r.v.*)

FinancialDerivative[{"American","Call"},{"StrikePrice"->5,"Expiration"-
>5},{"InterestRate"->0.01,"Volatility"->0.1,"CurrentPrice"-
>5,"Dividend"->0.01}]

0.42803

FinancialDerivative[{"American","Call"},{"StrikePrice"-
>npv[5],"Expiration"->5},{"InterestRate"->0.01,"Volatility"-
>0.1,"CurrentPrice"->npv[5],"Dividend"->0.01}]

0.42803


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