Re: am I correctly perceiving a weakness in FinancialDerivative[] ?
- To: mathgroup at smc.vnet.net
- Subject: [mg120810] Re: am I correctly perceiving a weakness in FinancialDerivative[] ?
- From: Dana DeLouis <dana01 at me.com>
- Date: Thu, 11 Aug 2011 05:12:19 -0400 (EDT)
- Delivered-to: l-mathgroup@mail-archive0.wolfram.com
... though I think I am finding some problems with the way
... this function (FinancialDerivative) works, especially for American option.
Hi. There are lots of other problems as well. Here's just one.
This was my first use of the function.
Note that the dividend of this $45 Call was very small, yet the returned value was almost $44 !!
This is just not even close!!
FinancialDerivative[{"American","Call"},{"StrikePrice"->50,"Expiration"->{2011,12,16}},
{"CurrentPrice"->45,"InterestRate"->0.1,"Volatility"->0.1,"Dividend"->0.00002}]
43.94
Changing the dividend just a fraction brought the price down to 0.16
FinancialDerivative[{"American","Call"},{"StrikePrice"->50,"Expiration"->{2011,12,16}},
{"CurrentPrice"->45,"InterestRate"->0.1,"Volatility"->0.1,"Dividend"->0.00001}]
0.158963
As others are starting to mention, both the FinancialDerivative and FinancialData functions are just not reliable.
It's too bad. These would be great functions to have working.
Dana DeLouis
$Version
8.0 for Mac OS X x86 (64-bit) (November 6, 2010)
= = = = = = = = = = = = = = = = = = =
On Aug 6, 2:16 am, Michael Stern <nycst... at gmail.com> wrote:
> I've got it,
>
> One does
>
> FinancialDerivative[{"American", "Put"}, {"StrikePrice" -> 1,
> "Expiration" -> .1}, {"InterestRate" -> 0, "Volatility" -> 0.1,
> "CurrentPrice" -> 1, "Dividend" -> 0, "Value" -> .1},
> {"ImpliedVolatility"}]
>
> though I think I am finding some problems with the way this function
> works, especially for American option.
>
> MS
On Aug 6, 2:16 am, Michael Stern <nycst... at gmail.com> wrote:
> It would seem that one of the most natural uses of the new built-in
> FinancialDerivative function would be to solve for its inputs. However,
> the functions seems to be structured to make this impossible.
>
> For example, given the price and other aspects of a European call
> options, I tried to solve for implied volatility. No luck
>
> NSolve[FinancialDerivative[{"European",
> "Call"}, {"StrikePrice" -> 141,
> "Expiration" -> .08}, {"InterestRate" -> 0.005,
> "Volatility" -> x, "CurrentPrice" -> 142.}] == 6., x]
>
> FinancialDerivative::checknumeric: Parameters {Volatility->x} cannot
> have non-numeric values. >>
>
> Is there some trick here I'm missing?
>
> Michael Stern
> Merrin Capital Management
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