OPT_JUMP_DIFF

OPT_JUMP_DIFF theoretical price of an option according to the Jump Diffusion process

Synopsis

OPT_JUMP_DIFF(call_put_flag,spot,strike,time,rate,volatility,lambda,gamma)

Arguments

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

spot: spot price

strike: strike price

time: time to maturity in years

rate: the annualized rate of interest

volatility: annualized volatility of the asset in percent for the period through to the exercise date

lambda: expected number of 'jumps' per year

gamma: proportion of volatility explained by the 'jumps'

Description

OPT_JUMP_DIFF models the theoretical price of an option according to the Jump Diffusion process (Merton).