webcab.lib.finance.options
Class EuropeanEvaluation

java.lang.Object
  |
  +--webcab.lib.finance.options.EuropeanEvaluation

All Implemented Interfaces:

Serializable

public class EuropeanEvaluation

extends Object

implements Serializable

Within this class we consider the evaluation of the present value of European options on equities, equity indexes, currencies and futures contracts in accordance with the classical Black-Scholes model.

See Also:

Serialized Form

Constructor Summary

EuropeanEvaluation()
Creates a new instance.

Method Summary

double	call(double price, double strike, double riskFreeRate, double volatility, Date evaluationDate, Date maturityDate, BusinessCalendar businessCalendar) Calculates the present value of a European call option.
double	call(double price, double strike, double riskFreeRate, double volatility, double timeToMaturity) Calculates the present value of a European call option.
double	callOnCurrency(double foreignRate, double exchangeRate, double strike, double riskFreeRate, double volatility, Date evaluationDate, Date maturityDate, BusinessCalendar businessCalendar) Evaluates the value of a European call option on a currency.
double	callOnCurrency(double foreignRate, double exchangeRate, double strike, double riskFreeRate, double volatility, double timeToMaturity) Evaluates the value of a European call option on a currency.
double	callOnFutures(double futuresPrice, double strike, double riskFreeRate, double volatility, Date evaluationDate, Date maturityDate, BusinessCalendar businessCalendar) Evaluates the present value of a European call option on a (stock) futures contract.
double	callOnFutures(double futuresPrice, double strike, double riskFreeRate, double volatility, double timeToMaturity) Evaluates the present value of a European call option on a (stock) futures contract.
double	callOnIndex(double yield, double indexValue, double strike, double riskFreeRate, double volatility, Date evaluationDate, Date maturityDate, BusinessCalendar businessCalendar) Evaluates the value of a European call option on an index.
double	callOnIndex(double yield, double indexValue, double strike, double riskFreeRate, double volatility, double timeToMaturity) Evaluates the value of a European call option on an index.
double	callWithDividends(double stockPrice, double strike, double riskFreeRate, double volatility, Date evaluationDate, Date maturityDate, double[] dividend, double[] dividendPaymentDates, BusinessCalendar businessCalendar) Calculates the present value of a European call option on an equity investment which pays dividends during the options life.
double	callWithDividends(double stockPrice, double strike, double riskFreeRate, double volatility, double timeToMaturity, double[] dividend, double[] dividendPaymentDates) Calculates the present value of a European call option on an equity investment which pays dividends during the options life.
double	callWithYield(double yield, double stockPrice, double strike, double riskFreeRate, double volatility, Date evaluationDate, Date maturityDate, BusinessCalendar businessCalendar) Calculates the value of a European call option where the underlying asset pays a continuous dividend.
double	callWithYield(double yield, double stockPrice, double strike, double riskFreeRate, double volatility, double timeToMaturity) Calculates the value of a European call option where the underlying asset pays a continuous dividend.
double	payOffCall(double maturityPrice, double strike) This method calculates the payoff at maturity from a European call option.
double	payOffPut(double maturityPrice, double strike) This method calculates the payoff at maturity from a European put option.
double	put(double stockPrice, double strike, double riskFreeRate, double volatility, Date evaluationDate, Date maturityDate, BusinessCalendar businessCalendar) Calculates the present value of a European put option on an investment asset which does not pay any dividends, coupons or interest.
double	put(double stockPrice, double strike, double riskFreeRate, double volatility, double timeToMaturity) Calculates the present value of a European put option on an investment asset which does not pay any dividends, coupons or interest.
double	putOnCurrency(double foreignRate, double exchangeRate, double strike, double riskFreeRate, double volatility, Date evaluationDate, Date maturityDate, BusinessCalendar businessCalendar) Evaluates the value of a European put options on a currency.
double	putOnCurrency(double foreignRate, double exchangeRate, double strike, double riskFreeRate, double volatility, double timeToMaturity) Evaluates the value of a European put options on a currency.
double	putOnFutures(double futuresPrice, double strike, double riskFreeRate, double volatility, Date evaluationDate, Date maturityDate, BusinessCalendar businessCalendar) Evaluates the present value of a European put option on a (stock) futures contract.
double	putOnFutures(double futuresPrice, double strike, double riskFreeRate, double volatility, double timeToMaturity) Evaluates the present value of a European put option on a (stock) futures contract.
double	putOnIndex(double yield, double indexValue, double strike, double riskFreeRate, double volatility, Date evaluationDate, Date maturityDate, BusinessCalendar businessCalendar) Evaluates the value of a European put option on an index.
double	putOnIndex(double yield, double indexValue, double strike, double riskFreeRate, double volatility, double timeToMaturity) Evaluates the value of a European put option on an index.
double	putWithDividends(double stockPrice, double strike, double riskFreeRate, double volatility, Date evaluationDate, Date maturityDate, double[] dividends, double[] dividendPaymentDates, BusinessCalendar businessCalendar) Calculates the present value of a European put option on an equity investment which pays dividends during the options life.
double	putWithDividends(double stockPrice, double strike, double riskFreeRate, double volatility, double timeToMaturity, double[] dividends, double[] dividendPaymentDates) Calculates the present value of a European put option on an equity investment which pays dividends during the options life.
double	putWithYield(double yield, double stockPrice, double strike, double riskFreeRate, double volatility, Date evaluationDate, Date maturityDate, BusinessCalendar businessCalendar) Evaluates the present value of a European put option where the underlying asset pays a continuous dividend.
double	putWithYield(double yield, double stockPrice, double strike, double riskFreeRate, double volatility, double timeToMaturity) Evaluates the present value of a European put option where the underlying asset pays a continuous dividend.
double	totalValue(double delta, double theta, double gamma, double assetPrice, double riskFreeRate, double volatility) Here we derive an estimate of the total value of a portfolio of derivatives whch depend on some underlying asset.

Methods inherited from class java.lang.Object

clone, equals, finalize, getClass, hashCode, notify, notifyAll, toString, wait, wait, wait

Constructor Detail

EuropeanEvaluation

public EuropeanEvaluation()

Creates a new instance.

Method Detail

payOffCall

public double payOffCall(double maturityPrice,
                         double strike)
                  throws EuropeanEvaluationDemoException

This method calculates the payoff at maturity from a European call option.

Parameters:

maturityPrice - the price of the underlying asset at the mature on the option contract

strike - the strike price of the call option

EuropeanEvaluationDemoException

payOffPut

public double payOffPut(double maturityPrice,
                        double strike)
                 throws EuropeanEvaluationDemoException

This method calculates the payoff at maturity from a European put option.

Parameters:

maturityPrice - the price of the underlying asset price at the maturity of the option contract

strike - the strike price of the put option

EuropeanEvaluationDemoException

call

public double call(double price,
                   double strike,
                   double riskFreeRate,
                   double volatility,
                   Date evaluationDate,
                   Date maturityDate,
                   BusinessCalendar businessCalendar)
            throws EuropeanEvaluationDemoException

Calculates the present value of a European call option.

Parameters:

price - the present price of the underlying asset on which the call option can be exercised

strike - the strike price of the call option

riskFreeRate - the continuously compounded risk free interest rate expressed in decimal format (i.e. 1 percent = 0.01)

volatility - the volatility of the price of the underlying asset

evaluationDate - the evaluation date of the option

maturityDate - the date when the option contract matures

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

EuropeanEvaluationDemoException

call

public double call(double price,
                   double strike,
                   double riskFreeRate,
                   double volatility,
                   double timeToMaturity)
            throws EuropeanEvaluationDemoException

Calculates the present value of a European call option.

Parameters:

price - the present price of the underlying asset on which the call option can be exercised

strike - the strike price of the call option

riskFreeRate - the continuously compounded risk free interest rate expressed in decimal format (i.e. 1 percent = 0.01)

volatility - the volatility of the price of the underlying asset

timeToMaturity - the time (in years) until the option matures

EuropeanEvaluationDemoException

put

public double put(double stockPrice,
                  double strike,
                  double riskFreeRate,
                  double volatility,
                  Date evaluationDate,
                  Date maturityDate,
                  BusinessCalendar businessCalendar)
           throws EuropeanEvaluationDemoException

Calculates the present value of a European put option on an investment asset which does not pay any dividends, coupons or interest.

Parameters:

stockPrice - the present price of the stock price

strike - the strike price of the put option

riskFreeRate - the continuously compounded risk free interest rate expressed in decimal format (i.e. 1 percent = 0.01)

volatility - the volatility of the underlying asset price

evaluationDate - the evaluation date of the option

maturityDate - the date when the option contract matures

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

EuropeanEvaluationDemoException

put

public double put(double stockPrice,
                  double strike,
                  double riskFreeRate,
                  double volatility,
                  double timeToMaturity)
           throws EuropeanEvaluationDemoException

Calculates the present value of a European put option on an investment asset which does not pay any dividends, coupons or interest.

Parameters:

stockPrice - the present price of the stock price

strike - the strike price of the put option

riskFreeRate - the continuously compounded risk free interest rate expressed in decimal format (i.e. 1 percent = 0.01)

volatility - the volatility of the underlying asset price

timeToMaturity - the time (in years) until the option contract matures

EuropeanEvaluationDemoException

callWithDividends

public double callWithDividends(double stockPrice,
                                double strike,
                                double riskFreeRate,
                                double volatility,
                                Date evaluationDate,
                                Date maturityDate,
                                double[] dividend,
                                double[] dividendPaymentDates,
                                BusinessCalendar businessCalendar)
                         throws EuropeanEvaluationDemoException

Calculates the present value of a European call option on an equity investment which pays dividends during the options life. This method extends the Black - Scholes model by treating the dividends as a risk free component of the total return.

Parameters:

stockPrice - the present market price of the stock

strike - the strike of the call option

riskFreeRate - the continuously compounded risk free interest rate expressed in decimal format (i.e. 1 percent = 0.01)

volatility - the volatility of the stock

dividendPaymentDates - an array of months to when each of the corresponding dividend payments will be paid

evaluationDate - the evaluation date of the option

maturityDate - the date when the option contract matures

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

EuropeanEvaluationDemoException

callWithDividends

public double callWithDividends(double stockPrice,
                                double strike,
                                double riskFreeRate,
                                double volatility,
                                double timeToMaturity,
                                double[] dividend,
                                double[] dividendPaymentDates)
                         throws EuropeanEvaluationDemoException

Calculates the present value of a European call option on an equity investment which pays dividends during the options life. This method extends the Black - Scholes model by treating the dividends as a risk free component of the total return.

Parameters:

stockPrice - the present market price of the stock

strike - the strike of the call option

riskFreeRate - the continuously compounded risk free interest rate expressed in decimal format (i.e. 1 percent = 0.01)

volatility - the volatility of the stock

timeToMaturity - the time to the maturity of the option (in years)

dividendPaymentDates - an array of months to when each of the corresponding dividend payments will be paid

EuropeanEvaluationDemoException

putWithDividends

public double putWithDividends(double stockPrice,
                               double strike,
                               double riskFreeRate,
                               double volatility,
                               Date evaluationDate,
                               Date maturityDate,
                               double[] dividends,
                               double[] dividendPaymentDates,
                               BusinessCalendar businessCalendar)
                        throws EuropeanEvaluationDemoException

Calculates the present value of a European put option on an equity investment which pays dividends during the options life. This method extends the Black - Scholes model by treating the dividends as a risk free component of the total return.

Parameters:

stockPrice - the present stock price

strike - the strike of the call option

riskFreeRate - the continuously compounded risk free interest rate expressed in decimal format (i.e. 1 percent = 0.01)

volatility - the volatility of the stock price

dividends - an array of dividend payments during the option period

dividendPaymentDates - an array of months to when each of the corresponding dividend payments will be paid

evaluationDate - the evaluation date of the option

maturityDate - the date when the option contract matures

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

EuropeanEvaluationDemoException

putWithDividends

public double putWithDividends(double stockPrice,
                               double strike,
                               double riskFreeRate,
                               double volatility,
                               double timeToMaturity,
                               double[] dividends,
                               double[] dividendPaymentDates)
                        throws EuropeanEvaluationDemoException

Calculates the present value of a European put option on an equity investment which pays dividends during the options life. This method extends the Black - Scholes model by treating the dividends as a risk free component of the total return.

Parameters:

stockPrice - the present stock price

strike - the strike of the call option

riskFreeRate - the continuously compounded risk free interest rate expressed in decimal format (i.e. 1 percent = 0.01)

volatility - the volatility of the stock price

timeToMaturity - the time (in years) to the maturity of the option

dividends - an array of dividend payments during the option period

dividendPaymentDates - an array of months to when each of the corresponding dividend payments will be paid

EuropeanEvaluationDemoException

callWithYield

public double callWithYield(double yield,
                            double stockPrice,
                            double strike,
                            double riskFreeRate,
                            double volatility,
                            Date evaluationDate,
                            Date maturityDate,
                            BusinessCalendar businessCalendar)
                     throws EuropeanEvaluationDemoException

Calculates the value of a European call option where the underlying asset pays a continuous dividend.

Parameters:

yield - this is the continuous dividend yield paid by the underlying asset

stockPrice - the stock priceo

strike - the strike price of the call option

riskFreeRate - the continuously compounded risk free interest rate expressed in decimal format (i.e. 1 percent = 0.01)

volatility - the volatility of the stock or asset price

evaluationDate - the evaluation date of the option

maturityDate - the date when the option contract matures

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

EuropeanEvaluationDemoException

callWithYield

public double callWithYield(double yield,
                            double stockPrice,
                            double strike,
                            double riskFreeRate,
                            double volatility,
                            double timeToMaturity)
                     throws EuropeanEvaluationDemoException

Calculates the value of a European call option where the underlying asset pays a continuous dividend.

Parameters:

yield - this is the continuous dividend yield paid by the underlying asset

stockPrice - the stock priceo

strike - the strike price of the call option

riskFreeRate - the continuously compounded risk free interest rate expressed in decimal format (i.e. 1 percent = 0.01)

volatility - the volatility of the stock or asset price

timeToMaturity - the time (in years) to the maturity of the option

EuropeanEvaluationDemoException

putWithYield

public double putWithYield(double yield,
                           double stockPrice,
                           double strike,
                           double riskFreeRate,
                           double volatility,
                           Date evaluationDate,
                           Date maturityDate,
                           BusinessCalendar businessCalendar)
                    throws EuropeanEvaluationDemoException

Evaluates the present value of a European put option where the underlying asset pays a continuous dividend.

Parameters:

yield - the continuous dividend yield paid by the underlying asset

stockPrice - the stock price

strike - the strike price of the put option

riskFreeRate - the continuously compounded risk free interest rate expressed in decimal format (i.e. 1 percent = 0.01)

volatility - the volatility of the stock or asset price

evaluationDate - the evaluation date of the option

maturityDate - the date when the option contract matures

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

EuropeanEvaluationDemoException

putWithYield

public double putWithYield(double yield,
                           double stockPrice,
                           double strike,
                           double riskFreeRate,
                           double volatility,
                           double timeToMaturity)
                    throws EuropeanEvaluationDemoException

Evaluates the present value of a European put option where the underlying asset pays a continuous dividend.

Parameters:

yield - the continuous dividend yield paid by the underlying asset

stockPrice - the stock price

strike - the strike price of the put option

riskFreeRate - the continuously compounded risk free interest rate expressed in decimal format (i.e. 1 percent = 0.01)

volatility - the volatility of the stock or asset price

timeToMaturity - the time (in years) until the option matures

EuropeanEvaluationDemoException

callOnIndex

public double callOnIndex(double yield,
                          double indexValue,
                          double strike,
                          double riskFreeRate,
                          double volatility,
                          Date evaluationDate,
                          Date maturityDate,
                          BusinessCalendar businessCalendar)
                   throws EuropeanEvaluationDemoException

Evaluates the value of a European call option on an index.

Parameters:

yield - the average yield of the contingents of the index

indexValue - the value of the index

strike - index value at which the option is exercised

riskFreeRate - the continuously compounded risk free interest rate expressed in decimal format (i.e. 1 percent = 0.01)

volatility - the volatility of the index

evaluationDate - the evaluation date of the option

maturityDate - the date when the option contract matures

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

EuropeanEvaluationDemoException

callOnIndex

public double callOnIndex(double yield,
                          double indexValue,
                          double strike,
                          double riskFreeRate,
                          double volatility,
                          double timeToMaturity)
                   throws EuropeanEvaluationDemoException

Evaluates the value of a European call option on an index.

Parameters:

yield - the average yield of the contingents of the index

indexValue - the value of the index

strike - index value at which the option is exercised

riskFreeRate - the continuously compounded risk free interest rate expressed in decimal format (i.e. 1 percent = 0.01)

volatility - the volatility of the index

timeToMaturity - the time (in years) until the option matures

EuropeanEvaluationDemoException

putOnIndex

public double putOnIndex(double yield,
                         double indexValue,
                         double strike,
                         double riskFreeRate,
                         double volatility,
                         Date evaluationDate,
                         Date maturityDate,
                         BusinessCalendar businessCalendar)
                  throws EuropeanEvaluationDemoException

Evaluates the value of a European put option on an index.

Parameters:

yield - the average yield of the contingents of the index

indexValue - the value of the index

strike - index value at which the option is exercised

riskFreeRate - the continuously compounded risk free interest rate expressed in decimal format (i.e. 1 percent = 0.01)

volatility - the volatility of the index

evaluationDate - the evaluation date of the option

maturityDate - the date when the option contract matures

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

EuropeanEvaluationDemoException

putOnIndex

public double putOnIndex(double yield,
                         double indexValue,
                         double strike,
                         double riskFreeRate,
                         double volatility,
                         double timeToMaturity)
                  throws EuropeanEvaluationDemoException

Evaluates the value of a European put option on an index.

Parameters:

yield - the average yield of the contingents of the index

indexValue - the value of the index

strike - index value at which the option is exercised

riskFreeRate - the continuously compounded risk free interest rate expressed in decimal format (i.e. 1 percent = 0.01)

volatility - the volatility of the index

timeToMaturity - the time (in years) until the option contract matures

EuropeanEvaluationDemoException

callOnCurrency

public double callOnCurrency(double foreignRate,
                             double exchangeRate,
                             double strike,
                             double riskFreeRate,
                             double volatility,
                             Date evaluationDate,
                             Date maturityDate,
                             BusinessCalendar businessCalendar)
                      throws EuropeanEvaluationDemoException

Evaluates the value of a European call option on a currency.

Parameters:

foreignRate - the continuously compounded risk free interest rate in the foreign currency

exchangeRate - the present exchange rate

strike - the exchange rate at which the option can be exercised

riskFreeRate - continuously compounded risk free interest rate in the base currency expressed in decimal format (i.e. 1 percent = 0.01)

volatility - the volatility of the exchange rate

evaluationDate - the evaluation date of the option

maturityDate - the date when the option contract matures

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

EuropeanEvaluationDemoException

callOnCurrency

public double callOnCurrency(double foreignRate,
                             double exchangeRate,
                             double strike,
                             double riskFreeRate,
                             double volatility,
                             double timeToMaturity)
                      throws EuropeanEvaluationDemoException

Evaluates the value of a European call option on a currency.

Parameters:

foreignRate - the continuously compounded risk free interest rate in the foreign currency

exchangeRate - the present exchange rate

strike - the exchange rate at which the option can be exercised

riskFreeRate - continuously compounded risk free interest rate in the base currency expressed in decimal format (i.e. 1 percent = 0.01)

volatility - the volatility of the exchange rate

timeToMaturity - time to the maturity of the option (in years)

EuropeanEvaluationDemoException

putOnCurrency

public double putOnCurrency(double foreignRate,
                            double exchangeRate,
                            double strike,
                            double riskFreeRate,
                            double volatility,
                            Date evaluationDate,
                            Date maturityDate,
                            BusinessCalendar businessCalendar)
                     throws EuropeanEvaluationDemoException

Evaluates the value of a European put options on a currency.

Parameters:

foreignRate - the continuously compounded risk free interest rate in the foreign currency

exchangeRate - the present exchange rate

strike - the exchange rate at which the option can be exercised

riskFreeRate - the risk free interest rate in the base currency expressed in decimal format (i.e. 1 percent = 0.01)

volatility - the volatility of the exchange rate

evaluationDate - the evaluation date of the option

maturityDate - the date when the option contract matures

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

EuropeanEvaluationDemoException

putOnCurrency

public double putOnCurrency(double foreignRate,
                            double exchangeRate,
                            double strike,
                            double riskFreeRate,
                            double volatility,
                            double timeToMaturity)
                     throws EuropeanEvaluationDemoException

Evaluates the value of a European put options on a currency.

Parameters:

foreignRate - the continuously compounded risk free interest rate in the foreign currency

exchangeRate - the present exchange rate

strike - the exchange rate at which the option can be exercised

riskFreeRate - the risk free interest rate in the base currency expressed in decimal format (i.e. 1 percent = 0.01)

volatility - the volatility of the exchange rate

timeToMaturity - the time (in years) until the option contract matures

EuropeanEvaluationDemoException

callOnFutures

public double callOnFutures(double futuresPrice,
                            double strike,
                            double riskFreeRate,
                            double volatility,
                            Date evaluationDate,
                            Date maturityDate,
                            BusinessCalendar businessCalendar)
                     throws EuropeanEvaluationDemoException

Evaluates the present value of a European call option on a (stock) futures contract.

Parameters:

futuresPrice - the present price the underlying futures price

strike - the strike of the options contract. The strike is the price at which the underlying futures contract can be purchased at when the call option is exercised.

riskFreeRate - continuously compounded risk free interest rate expressed in decimal format (i.e. 1 percent = 0.01)

volatility - the volatility of the underlying futures contract

evaluationDate - the evaluation date of the option

maturityDate - the date when the option contract matures

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

EuropeanEvaluationDemoException

callOnFutures

public double callOnFutures(double futuresPrice,
                            double strike,
                            double riskFreeRate,
                            double volatility,
                            double timeToMaturity)
                     throws EuropeanEvaluationDemoException

Evaluates the present value of a European call option on a (stock) futures contract.

Parameters:

futuresPrice - the present price the underlying futures price

strike - the strike of the options contract. The strike is the price at which the underlying futures contract can be purchased at when the call option is exercised.

riskFreeRate - continuously compounded risk free interest rate expressed in decimal format (i.e. 1 percent = 0.01)

volatility - the volatility of the underlying futures contract

timeToMaturity - the time (in years) until the option contract expires

EuropeanEvaluationDemoException

putOnFutures

public double putOnFutures(double futuresPrice,
                           double strike,
                           double riskFreeRate,
                           double volatility,
                           Date evaluationDate,
                           Date maturityDate,
                           BusinessCalendar businessCalendar)
                    throws EuropeanEvaluationDemoException

Evaluates the present value of a European put option on a (stock) futures contract.

Parameters:

futuresPrice - the present price of the underlying futures contract

strike - the strike of the option contract. The strike is the price at which the underlying futures contracts can be sold at when the put option is exercised.

riskFreeRate - the risk free interest rate expressed in decimal format (i.e. 1 percent = 0.01)

volatility - the volatility of the underlying futures contract

evaluationDate - the evaluation date of the option

maturityDate - the date when the option contract matures

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

EuropeanEvaluationDemoException

putOnFutures

public double putOnFutures(double futuresPrice,
                           double strike,
                           double riskFreeRate,
                           double volatility,
                           double timeToMaturity)
                    throws EuropeanEvaluationDemoException

Evaluates the present value of a European put option on a (stock) futures contract.

Parameters:

futuresPrice - the present price of the underlying futures contract

strike - the strike of the option contract. The strike is the price at which the underlying futures contracts can be sold at when the put option is exercised.

riskFreeRate - the risk free interest rate expressed in decimal format (i.e. 1 percent = 0.01)

volatility - the volatility of the underlying futures contract

timeToMaturity - the time (in years) until the option contract matures

EuropeanEvaluationDemoException

totalValue

public double totalValue(double delta,
                         double theta,
                         double gamma,
                         double assetPrice,
                         double riskFreeRate,
                         double volatility)
                  throws EuropeanEvaluationDemoException

Here we derive an estimate of the total value of a portfolio of derivatives whch depend on some underlying asset.

Example: This method could be applied to a portfolio consisting of derivative contracts on Gold (i.e. AU). In this case, if we know the delta, theta and gamma of the gold portfolio, the market price and volatility of gold and the risk free interest rate of the reference currency. Then we are able to estimate (to the second order) the value of the entire portfolio with respect to the reference currency.

Parameters:

delta - the delta of the portfolio

theta - the theta of the portfolio

gamma - the gamma of the portfolio

assetPrice - the underlying asset price

volatility - the volatility of the underlying asset price

riskFreeRate - the continuously compounded risk free interest rate in the reference currency expressed in decimal format (i.e. 1 percent = 0.01)

EuropeanEvaluationDemoException