BlackscholesCalls {pcalls}

Function that prices a Call via Black-Scholes formula

Description

Black-Scholes is a model used to price Vanilla European Options assuming that the market is free from arbitrage and the underlying asset price follows a geometric Brownian motion. In other words, it assumes that the underlying stock price follows a random walk and it partially satisfies the efficient market hypothesis.

Usage

BlackscholesCalls(s0, k, t, r, vol)

Arguments

s0

stock price at time 0

k

strike price

t

time to maturity in years

r

annual interest rate

vol

annual volatility

Details

No details

Value

Price of the call

Warning

All input values must be stricly positive.

Author(s)

Degiorgi Elia, Milan Federico, Zaramella Davide, Stoeva Valerija

References

"Option Pricing Using Different Techniques" by Degiorgi Elia, Milan Federico, Zaramella Davide, Stoeva Valerija (2019)

Examples

BlackscholesCalls(10,11,1,0.05,0.2) #  0.6040088