AmericanPutPriceBinomial {Dowd}

Binomial Put Price

Description

Estimates the price of an American Put, using the binomial approach.

Usage

AmericanPutPriceBinomial(stockPrice, strike, r, sigma, maturity, numberSteps)

Arguments

stockPrice

Stock price of underlying stock

strike

Strike price of the option

r

Risk-free rate

sigma

Volatility of the underlying stock and is in annualised term

maturity

The term to maturity of the option in days

numberSteps

The number of time-steps in the binomial tree

Value

Binomial American put price

Author(s)

Dinesh Acharya

References

Dowd, Kevin. Measuring Market Risk, Wiley, 2007.

Lyuu, Yuh-Dauh. Financial Engineering & Computation: Principles, Mathematics, Algorithms, Cambridge University Press, 2002.

Examples

# Estimates the price of an American Put
   AmericanPutPriceBinomial(27.2, 25, .03, .2, 60, 30)