BCC {BCC1997} R Documentation

## Calculation of Option Prices Based on a Universal Solution

### Description

This is a function to calculate the prices of European options based on the universal solution provided by Bakshi, Cao and Chen (1997) <doi:10.1111/j.1540-6261.1997.tb02749.x>. This solution takes stochastic volatility, stochastic interest and random jumps into consideration. Please cite their work if this package is used.

### Usage

```BCC(kappav, kappar, thetav, thetar, sigmav, sigmar, muj, sigmaj, rho, lambda,
S0, K, V0, R0, t)
```

### Arguments

 `kappav` Speed of convergence on variance `kappar` Speed of convergence on risk free rate `thetav` Long-term variance `thetar` Long-term risk free rate `sigmav` Volatility of variance `sigmar` Volatility of risk free rate `muj` Jump size `sigmaj` Volatility of jumps `rho` Correlation between underlying price and variance `lambda` Jump intensity `S0` Initial/Current underlying price `K` Strike price `V0` Initial/Current variance `R0` Initial/Current risk free rate `t` Time to maturity

### Value

Call: return the price of the European call oprion

Put: return the price of the European put oprion

### Note

Please notice each parameter has its "reasonable range". e.g. volatilities cannot be zero or smaller than zero, please input 0.0000001 when they are zero.

### Examples

```BCC(kappav=0,kappar=0,thetav=0,thetar=0,sigmav=0.0000001,sigmar=0.0000001,muj=0,
sigmaj=0.0000001,rho=0,lambda=0,S0=100,K=100,V0=0.04,R0=0.01,t=1)
BCC(kappav=0.5,kappar=0,thetav=0.025,thetar=0,sigmav=0.09,sigmar=0.0000001,muj=0,
sigmaj=0.0000001,rho=0.1,lambda=0,S0=100,K=100,V0=0.04,R0=0.01,t=1)
```

[Package BCC1997 version 0.1.1 Index]