Question on FinancialDerivative in Ver 8
- To: mathgroup at smc.vnet.net
- Subject: [mg114065] Question on FinancialDerivative in Ver 8
- From: Dana DeLouis <dana.del at gmail.com>
- Date: Mon, 22 Nov 2010 07:39:27 -0500 (EST)
Hi. Here's a Call option with Low Volatility 1 year out.
A dividend of 0 returns a value of 0.05 for this call option.
FinancialDerivative[
{"American", "Call"},
{"StrikePrice" -> 50,
"Expiration" -> 1},
{ "CurrentPrice" -> 30,
"InterestRate" -> .1,
"Volatility" -> .2,
"Dividend" -> 0}]
0.05384
If I increase the Dividend to a penny, the Call option goes =91up=92 (not down) in price to 0.087 ??
FinancialDerivative[
{"American", "Call"},
{"StrikePrice" -> 50,
"Expiration" -> 1},
{ "CurrentPrice" -> 30,
"InterestRate" -> .1,
"Volatility" -> .2,
"Dividend" -> .01}]
0.08731
If during a calculation, the dividend is calculated close to zero (say 0.0001) the Call Option is now worth $27.05 ?? Huh? How I would love to sell this Call option all day long. :>)
FinancialDerivative[
{"American", "Call"},
{"StrikePrice" -> 50,
"Expiration" -> 1},
{ "CurrentPrice" -> 30,
"InterestRate" -> .1,
"Volatility" -> .2,
"Dividend" -> 0.0001}]
27.05
A Dividend of 0.10 brings the price back down to below that of the 0 dividend price.
FinancialDerivative[
{"American", "Call"},
{"StrikePrice" -> 50,
"Expiration" -> 1},
{ "CurrentPrice" -> 30,
"InterestRate" -> .1,
"Volatility" -> .2,
"Dividend" -> .10}]
0.01211
Any thoughts/insight into this?
Thanks.
I'm using an Apple Mac Pro w/ Ver 8.