webcab.lib.finance.options
Class PutCallParity

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

All Implemented Interfaces:

Serializable

public class PutCallParity

extends Object

implements Serializable

Within this class we implement put-call parity relations for:

1. Vanilla Options where the underlying asset does not pay dividends
2. Binary Options where the underlying asset does not pay dividends
3. Vanilla options where the underlying asset pays a continuous dividend

See Also:

Serialized Form

Constructor Summary

PutCallParity()
Creates a new instance.

Method Summary

double	callBinary(double binaryPut, double riskFreeRate, Date evaluationDate, Date expiryDate, BusinessCalendar businessCalendar) This method returns the Binary call option value at any time up to expiry when the Binary put, risk free interest rate and expiry values are known.
double	callBinary(double binaryPut, double riskFreeRate, double timeToExpiry) This method returns the Binary call option value at any time up to expiry when the Binary put, risk free interest rate and expiry values are known.
double	callEuropean(double valueOfPut, double assetPrice, double strike, double riskFreeRate, Date evaluationDate, Date expiryDate, BusinessCalendar businessCalendar) This method returns the value of the European call option when the value of the corresponding put option is known.
double	callEuropean(double valueOfPut, double assetPrice, double strike, double riskFreeRate, double timeToExpiry) This method returns the value of the European call option when the value of the corresponding put option is known.
double	callEuropeanWithDividends(double putValue, double dividendYield, double assetPrice, double strike, double riskFreeRate, Date evaluationDate, Date expiryDate, BusinessCalendar businessCalendar) Returns the value of a European call option on an underlying asset which pays a continuous dividend.
double	callEuropeanWithDividends(double putValue, double dividendYield, double assetPrice, double strike, double riskFreeRate, double timeToExpiry) Returns the value of a European call option on an underlying asset which pays a continuous dividend.
double	interestBinary(double binaryCall, double binaryPut, Date evaluationDate, Date expiryDate, BusinessCalendar businessCalendar) This method returns the risk free interest rate for all time prior to expiry when of the Binary put/call.
double	interestBinary(double binaryCall, double binaryPut, double timeToExpiry) This method returns the risk free interest rate for all time prior to expiry when of the Binary put/call.
double	interestEuropean(double valueOfCall, double valueOfPut, double assetValue, double strike, Date evaluationDate, Date expiryDate, BusinessCalendar businessCalendar) This method returns the implied risk free interest rate when the value of the European put/call options and the underlying asset price is known.
double	interestEuropean(double valueOfCall, double valueOfPut, double assetValue, double strike, double timeToExpiry) This method returns the implied risk free interest rate when the value of the European put/call options and the underlying asset price is known.
double	putBinary(double binaryCall, double riskFreeRate, Date evaluationDate, Date expiryDate, BusinessCalendar businessCalendar) This method returns the Binary put option value at any time up to expiry when the Binary call, risk free interest rate and expiry values are known.
double	putBinary(double binaryCall, double riskFreeRate, double timeToExpiry) This method returns the Binary put option value at any time up to expiry when the Binary call, risk free interest rate and expiry values are known.
double	putEuropean(double valueOfCall, double assetPrice, double strike, double riskFreeRate, Date evaluationDate, Date expiryDate, BusinessCalendar businessCalendar) This method returns the value of the European put option when the value of the corresponding call option is known.
double	putEuropean(double valueOfCall, double assetPrice, double strike, double riskFreeRate, double timeToExpiry) This method returns the value of the European put option when the value of the corresponding call option is known.
double	putEuropeanWithDividends(double callValue, double dividendYield, double assetPrice, double strike, double riskFreeRate, Date evaluationDate, Date expiryDate, BusinessCalendar businessCalendar) Returns the value of a European put option on an underlying asset which pays a continuous dividend.
double	putEuropeanWithDividends(double callValue, double dividendYield, double assetPrice, double strike, double riskFreeRate, double timeToExpiry) Returns the value of a European put option on an underlying asset which pays a continuous dividend.

Methods inherited from class java.lang.Object

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

Constructor Detail

PutCallParity

public PutCallParity()

Creates a new instance.

Method Detail

callBinary

public double callBinary(double binaryPut,
                         double riskFreeRate,
                         Date evaluationDate,
                         Date expiryDate,
                         BusinessCalendar businessCalendar)
                  throws PutCallParityDemoException

This method returns the Binary call option value at any time up to expiry when the Binary put, risk free interest rate and expiry values are known. Note that the Binary call and put options have the same underlying asset, expiry and strike.

Parameters:

binaryPut - the market price of the Binary put option

riskFreeRate - risk free interest rate

evaluationDate - the date when the option is evaluated

expiryDate - the date when the option contracts expire

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

PutCallParityDemoException

callBinary

public double callBinary(double binaryPut,
                         double riskFreeRate,
                         double timeToExpiry)
                  throws PutCallParityDemoException

This method returns the Binary call option value at any time up to expiry when the Binary put, risk free interest rate and expiry values are known. Note that the Binary call and put options have the same underlying asset, expiry and strike.

Parameters:

binaryPut - the market price of the Binary put option

riskFreeRate - risk free interest rate

PutCallParityDemoException

putBinary

public double putBinary(double binaryCall,
                        double riskFreeRate,
                        Date evaluationDate,
                        Date expiryDate,
                        BusinessCalendar businessCalendar)
                 throws PutCallParityDemoException

This method returns the Binary put option value at any time up to expiry when the Binary call, risk free interest rate and expiry values are known. Note that the Binary call and put options have the same underlying asset, expiry and strike.

Parameters:

binaryCall - value of the binary call option

riskFreeRate - risk free interest rate

evaluationDate - the date when the option is evaluated

expiryDate - the date when the option contracts expire

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

PutCallParityDemoException

putBinary

public double putBinary(double binaryCall,
                        double riskFreeRate,
                        double timeToExpiry)
                 throws PutCallParityDemoException

This method returns the Binary put option value at any time up to expiry when the Binary call, risk free interest rate and expiry values are known. Note that the Binary call and put options have the same underlying asset, expiry and strike.

Parameters:

binaryCall - value of the binary call option

riskFreeRate - risk free interest rate

timeToExpiry - the time (in years) until the put or call Binary options expire

PutCallParityDemoException

interestBinary

public double interestBinary(double binaryCall,
                             double binaryPut,
                             Date evaluationDate,
                             Date expiryDate,
                             BusinessCalendar businessCalendar)
                      throws PutCallParityDemoException

This method returns the risk free interest rate for all time prior to expiry when of the Binary put/call. Note that the expiry of both options and there strike are the identical.

Parameters:

binaryPut - value of the Binary put

binaryCall - value of the Binary call

evaluationDate - the date when the option is evaluated

expiryDate - the date when the option contracts expire

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

PutCallParityDemoException

interestBinary

public double interestBinary(double binaryCall,
                             double binaryPut,
                             double timeToExpiry)
                      throws PutCallParityDemoException

This method returns the risk free interest rate for all time prior to expiry when of the Binary put/call. Note that the expiry of both options and there strike are the identical.

Parameters:

binaryPut - value of the Binary put

binaryCall - value of the Binary call

timeToExpiry - the time (in years) until the put and call Binary option expires

PutCallParityDemoException

callEuropean

public double callEuropean(double valueOfPut,
                           double assetPrice,
                           double strike,
                           double riskFreeRate,
                           Date evaluationDate,
                           Date expiryDate,
                           BusinessCalendar businessCalendar)
                    throws PutCallParityDemoException

This method returns the value of the European call option when the value of the corresponding put option is known. Note that we assume that the underlying asset is assumed not to pay a dividend during the life of the option.

Parameters:

valueOfPut - the value of the put option

assetPrice - the value of the underlying asset

strike - the strike price of the European call option

riskFreeRate - the risk free interest rate during the life of the option

evaluationDate - the date when the option is evaluated

expiryDate - the date when the option contracts expire

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

PutCallParityDemoException

callEuropean

public double callEuropean(double valueOfPut,
                           double assetPrice,
                           double strike,
                           double riskFreeRate,
                           double timeToExpiry)
                    throws PutCallParityDemoException

This method returns the value of the European call option when the value of the corresponding put option is known. Note that we assume that the underlying asset is assumed not to pay a dividend during the life of the option.

Parameters:

valueOfPut - the value of the put option

timeToExpiry - the time (in years) until the expiry of the option contracts

assetPrice - the value of the underlying asset

strike - the strike price of the European call option

riskFreeRate - the risk free interest rate during the life of the option

PutCallParityDemoException

putEuropean

public double putEuropean(double valueOfCall,
                          double assetPrice,
                          double strike,
                          double riskFreeRate,
                          Date evaluationDate,
                          Date expiryDate,
                          BusinessCalendar businessCalendar)
                   throws PutCallParityDemoException

This method returns the value of the European put option when the value of the corresponding call option is known. Note that the underlying asset is assumed not to pay a dividend during the life of the option, and the put and call options have the same expiry and strike.

Parameters:

valueOfCall - the value of the call option

assetPrice - the value of the underlying asset

strike - strike of the options

riskFreeRate - risk free interest rate

evaluationDate - the date when the option is evaluated

expiryDate - the date when the option contracts expire

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

PutCallParityDemoException

putEuropean

public double putEuropean(double valueOfCall,
                          double assetPrice,
                          double strike,
                          double riskFreeRate,
                          double timeToExpiry)
                   throws PutCallParityDemoException

This method returns the value of the European put option when the value of the corresponding call option is known. Note that the underlying asset is assumed not to pay a dividend during the life of the option, and the put and call options have the same expiry and strike.

Parameters:

valueOfCall - the value of the call option

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

assetPrice - the value of the underlying asset

strike - strike of the options

riskFreeRate - risk free interest rate

PutCallParityDemoException

interestEuropean

public double interestEuropean(double valueOfCall,
                               double valueOfPut,
                               double assetValue,
                               double strike,
                               Date evaluationDate,
                               Date expiryDate,
                               BusinessCalendar businessCalendar)
                        throws PutCallParityDemoException

This method returns the implied risk free interest rate when the value of the European put/call options and the underlying asset price is known. Note that the put and call options have the same expiry and strike.

Parameters:

valueOfCall - value of the call option

valueOfPut - value of the put option

assetValue - the value of the underlying asset

strike - strike of the options contracts

evaluationDate - the date when the option is evaluated

expiryDate - the date when the option contracts expire

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

PutCallParityDemoException

interestEuropean

public double interestEuropean(double valueOfCall,
                               double valueOfPut,
                               double assetValue,
                               double strike,
                               double timeToExpiry)
                        throws PutCallParityDemoException

This method returns the implied risk free interest rate when the value of the European put/call options and the underlying asset price is known. Note that the put and call options have the same expiry and strike.

Parameters:

valueOfCall - value of the call option

valueOfPut - value of the put option

assetValue - the value of the underlying asset

timeToExpiry - the time (in years) until the put and call options expire

strike - strike of the options contracts

PutCallParityDemoException

callEuropeanWithDividends

public double callEuropeanWithDividends(double putValue,
                                        double dividendYield,
                                        double assetPrice,
                                        double strike,
                                        double riskFreeRate,
                                        Date evaluationDate,
                                        Date expiryDate,
                                        BusinessCalendar businessCalendar)
                                 throws PutCallParityDemoException

Returns the value of a European call option on an underlying asset which pays a continuous dividend. Index and currency European call options are examples of such assets.

Parameters:

dividendYield - the continuous dividend yield of the underlying asset during life of the option contract

assetPrice - the underlying asset price at evaluation time

riskFreeRate - the risk free interest rate

putValue - the value at evaluation time of the correspond put option with same expiry and strike as the call option value being calculated

strike - the strike of the European call (and put) option

evaluationDate - the date when the option is evaluated

expiryDate - the date when the option contracts expire

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

PutCallParityDemoException

callEuropeanWithDividends

public double callEuropeanWithDividends(double putValue,
                                        double dividendYield,
                                        double assetPrice,
                                        double strike,
                                        double riskFreeRate,
                                        double timeToExpiry)
                                 throws PutCallParityDemoException

Returns the value of a European call option on an underlying asset which pays a continuous dividend. Index and currency European call options are examples of such assets.

Parameters:

dividendYield - the continuous dividend yield of the underlying asset during life of the option contract

assetPrice - the underlying asset price at evaluation time

riskFreeRate - the risk free interest rate

putValue - the value at evaluation time of the correspond put option with same expiry and strike as the call option value being calculated

timeToExpiry - the time (in years) until the option expires

strike - the strike of the European call (and put) option

PutCallParityDemoException

putEuropeanWithDividends

public double putEuropeanWithDividends(double callValue,
                                       double dividendYield,
                                       double assetPrice,
                                       double strike,
                                       double riskFreeRate,
                                       Date evaluationDate,
                                       Date expiryDate,
                                       BusinessCalendar businessCalendar)
                                throws PutCallParityDemoException

Returns the value of a European put option on an underlying asset which pays a continuous dividend. Index and currency European put options are examples of such assets.

Parameters:

dividendYield - the continuous dividend yield of the underlying asset during life of the option contract

assetPrice - the underlying asset price at evaluation time

riskFreeRate - the risk free interest rate

callValue - the value at evaluation time of the correspond call option with same the expiry and strike as the call option

strike - the strike of the European put (and call) option

evaluationDate - the date when the option is evaluated

expiryDate - the date when the option contracts expire

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

PutCallParityDemoException

putEuropeanWithDividends

public double putEuropeanWithDividends(double callValue,
                                       double dividendYield,
                                       double assetPrice,
                                       double strike,
                                       double riskFreeRate,
                                       double timeToExpiry)
                                throws PutCallParityDemoException

Returns the value of a European put option on an underlying asset which pays a continuous dividend. Index and currency European put options are examples of such assets.

Parameters:

dividendYield - the continuous dividend yield of the underlying asset during life of the option contract

assetPrice - the underlying asset price at evaluation time

riskFreeRate - the risk free interest rate

callValue - the value at evaluation time of the correspond call option with same the expiry and strike as the call option

timeToExpiry - the time (in years) until the option expires

strike - the strike of the European put (and call) option

PutCallParityDemoException