OPT_EXTENDIBLE_WRITER

OPT_EXTENDIBLE_WRITER theoretical price of extendible writer options

Synopsis

OPT_EXTENDIBLE_WRITER(call_put_flag,spot,strike1,strike2,time1,time2,rate,cost_of_carry,volatility)

Arguments

call_put_flag: 'c' for a call and 'p' for a put

spot: spot price

strike1: strike price at which the option is struck

strike2: strike price at which the option is re-struck if out of the money at time1

time1: initial maturity of the option in years

time2: extended maturity in years if chosen

rate: annualized risk-free interest rate

cost_of_carry: net cost of holding the underlying asset

volatility: annualized volatility of the asset

Description

OPT_EXTENDIBLE_WRITER models the theoretical price of extendible writer options. These are options that have their maturity extended to time2 if the option is out of the money at time1.