Exchange Call Option Price

Posted by Szu-Yu (Gary) Pai

Option Price

Input:
Initial price of underlying asset 1 (S1)
Initial price of underlying asset 2 (S2)
Dividend of asset 1
Dividend of asset 2
Correlation
Time to maturity Years
Risk free interest rate (annulized)
Volatility of asset 1 (annulized)
Volatility of asset 2 (annulized)
Output:
Call value

The exchange option is an option allows the holder of the option to exchange one asset for another. The payoff of the exchange option is max(S1-S2,0). The calculation is based on Black-Sholes model with using Quasi-Monte Carlo method.

 •  March 30, 2013  • 

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