| collar.bls {FinancialMath} | R Documentation |
Collar Strategy - Black Scholes
Description
Gives a table and graphical representation of the payoff and profit of a collar strategy for a range of future stock prices. Uses the Black Scholes equation for the call and put prices.
Usage
collar.bls(S,K1,K2,r,t,sd,plot=FALSE)Arguments
S |
spot price at time 0 |
K1 |
strike price of the long put |
K2 |
strike price of the short call |
r |
yearly continuously compounded risk free rate |
t |
time of expiration (in years) |
sd |
standard deviation of the stock (volatility) |
plot |
tells whether or not to plot the payoff and profit |
Details
Stock price at time t =S_t
For S_t<=K1: payoff =K1-S_t
For K1<S_t<K2: payoff =0
For S_t>=K2: payoff =K2-S_t
profit = payoff+(price_{K2}-price_{K1})*e^{r*t}
Value
A list of two components.
Payoff |
A data frame of different payoffs and profits for given stock prices. |
Premiums |
A matrix of the premiums for the call and put options and the net cost. |
See Also
Examples
collar.bls(S=100,K1=90,K2=110,r=.05,t=1,sd=.2)