5.74 option_bjsten

Function File: [value] = option_bjsten (CallPutFlag, S, X, T, r, sigma, divrate)

Calculate the option price of an American call or put option stocks, futures, and currencies. The approximation method by Bjerksund and Stensland is used.

The Octave implementation is based on a R function implemented by Diethelm Wuertz Rmetrics - Pricing and Evaluating Basic Options, Date 2015-11-09 Version 3022.85

References: Haug E.G., The Complete Guide to Option Pricing Formulas
Example taken from Reference:

price = option_bjsten(1,42,40,0.75*365,0.04,0.35,0.08)
price = 5.2704

Variables:

• CallPutFlag: Call: ’1’, Put: ’0’
• S: stock price at time 0
• X: strike price
• T: time to maturity in days
• r: annual risk-free interest rate (continuously compounded)
• sigma: implied volatility of the stock price measured as annual standard deviation
• divrate: dividend rate p.a., continously compounded

See also: option_willowtree, option_bs.