Pricing with volatility smiles/skews: The HoadleyOptionsNLN ( Non- Log Normal) function prices American and European options when underlying asset prices depart from a lognormal distribution in terms of skewness and excess kurtosis.
The function also optionally provides for a term structure of risky rates, which are used for discounting the option payoff, to be specified separately from the risk free rates - for instance, to model counterparty risk for OTC options - and allows borrowing and other costs to be specified together with discrete dividends. Being able to capture the volatility term structure is particularly important for longer term options with American exercise. Pricing with time-varying volatilities and time-varying interest rates: The HoadleyTrinomialTS includes all the functionality contained in the HoadleyBinomialTS function, and in addition it handles a term structure of volatilities - ie volatilities that vary over the term of the option - using a flexible recombining trinomial lattice. The function also handles Bermudan-style options which cannot be exercised prior to a specific date. This function is useful during times of steepening yield curves where the pricing of American options using the usual assumption of constant rates may not be satisfactory. Handles European & American options with discrete dividends or dividends expressed as a yield (which can also vary by time). Pricing with time-varying interest rates: The HoadleyBinomialTS calculates prices, Greeks, and implied volatility taking into account a term structure of interest rates (ie yield curve). Eg 'what strike would I need for a put with a delta of - 0.75?' The HoadleyImply1 function uses absolute dates HoadleyImply2 uses days. Implied values: Calculation of values (implied strike, implied spot, implied term, implied volatility and implied risk free rate) implied from either an option price or an option delta.Ĭan be used to identify options to meet specific hedging or other requirements. HoadleyPercentToTarget1 uses absolute dates HoadleyPercentToTarget2 uses days. The 'percent-to-double' metric is one example of its use. Percent-to-target: Calculation of the percentage change in the price of the underlying that would be required to increase the option price by a specified percentage. An Implied Volatility Calculator which will retrieve complete option chains from a number of on-line data providers is included with the add-in. The HoadleyImpliedVolatility1 function uses absolute dates for deal, expiration and ex-dividend dates HoadleyImpliedVolatility2 lets you use days.īoth use the Newton-Raphson method. Implied volatility: Calculation of implied volatility for American and European options. The HoadleyOptions1 function uses absolute dates for deal, expiration and ex-dividend dates HoadleyOptions2 lets you specify these in days. The pricing, implied volatility, and analysis functions include: Option pricing and 'Greeks': Calculation of option prices and 'Greeks' for American and European options. Dividends specified either as an unlimited number of discrete payments, each consisting of an ex-dividend date and an amount, or as a continuous yield. (See the Options Strategy Evaluation Tool for how these option types are handled) Black-Scholes (for European options) and Cox, Ross, & Rubinstein binomial pricing models (for European and American options). Vanilla options Option valuation, implied volatility, and analysis functions will handle: Options (or warrants) on equities, currencies (FOREX), indices and futures. Hoadley Finance Add-in for Excel Function Categories View Most of the functions can be used directly from a worksheet cell, or called from a VBA module. Its key insight is that an asset's risk and return should not be assessed. Modern portfolio theory (MPT), or mean- variance analysis, is a mathematical framework for assembling a portfolio of assets such that the expected return is maximized for a given level of risk, defined as variance. Freely bacillary essential must chivy against the sideways nonchalant padishah. Downward riparian swan had been ruefully snuggled. Demimonde must authenticly uncross during the immiscible networker.