Examples
webUnRisk
Try webUnRisk, an interactive
risk-analysis tool. It is just one example of the types of financial
analysis you can perform when you combine the top-notch derivatives
pricing engine UnRisk PRICING ENGINE with the online
technical computing power of webMathematica.
Differing Methodologies and the Value of a Vanilla European
Call Option
Load the Package
Create the Instrument
This example shows the value of a vanilla European
call option on a dividend-paying equity as a function of time to maturity
and the equity price.
As we plot the value of the option as a function of time to
maturity and the spot price, the variable S is used to represent
the spot price.
Adaptive Integration
The following picture shows the value of the option as a function of time
to maturity and the equity price due to adaptive integration.
Black-Scholes Analytic Valuation
The following picture shows the value of the option as a function of time
to maturity and the equity price due to the analytic Black-Scholes formula.
Examining the Difference
The two plots have the same qualitative behavior. However, in the details
there is some difference (as the Black-Scholes value discounts the
dividends and therefore does not give the correct result). The following
picture shows the difference between the two methods as a function of time to
maturity and the equity price.
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