Introduction
This program calculates Option values using the Binomial Tree and the Black-Scholes method. The arguments needed to make the calculations are:
- Stock Spot Price
- Option Strike Price
- Stock Volatility Percentage
- Number of Steps
- Number of Years
- Risk Free Rate Percentage
As following the user may choose whether to valuate a "Put" or "Call" option and the valuation method of interest. I have included default values for the user to test the accuracy of the valuations and see how it works.
Insert Stock Spot Price(Default 155.87):
Insert Option Strike Price(Default 155.87):
Insert Stock Volatility Percentage Rate(Default 17.55):
Insert Number of Steps(Default 12):
Insert Number of Years(Default 3):
Insert Risk Free Percentage Rate(Default 0.86):
Insert 0 for Call Option or 1 for Put Option(Default 0)):
Insert 0 for Binomial Model or 1 for Black Scholes(Default 0)): 1
D1: 0.23686288255272936 D2: -0.06711203417560863
The value of the Call option is: 20.641202217436472
(For Binomial Tree Valuation method)
Binomial Tree Stock Prices
0 1 2 ... 10 11 12
0 155.870000 0.000000 0.000000 ... 0.000000 0.000000 0.000000
1 142.775337 170.165642 0.000000 ... 0.000000 0.000000 0.000000
2 130.780759 155.870000 185.772411 ... 0.000000 0.000000 0.000000
3 119.793847 142.775337 170.165642 ... 0.000000 0.000000 0.000000
4 109.729948 130.780759 155.870000 ... 0.000000 0.000000 0.000000
5 100.511518 119.793847 142.775337 ... 0.000000 0.000000 0.000000
6 92.067530 109.729948 130.780759 ... 0.000000 0.000000 0.000000
7 84.332922 100.511518 119.793847 ... 0.000000 0.000000 0.000000
8 77.248101 92.067530 109.729948 ... 0.000000 0.000000 0.000000
9 70.758476 84.332922 100.511518 ... 0.000000 0.000000 0.000000
10 64.814045 77.248101 92.067530 ... 374.848643 0.000000 0.000000
11 59.369007 70.758476 84.332922 ... 343.357551 409.227946 0.000000
12 54.381408 64.814045 77.248101 ... 314.512030 374.848643 446.760352
[13 rows x 13 columns]
Option Prices
0 1 2 ... 10 11 12
0 20.257051 0.000000 0.000000 ... 0.000000 0.000000 0.000000
1 12.353794 28.561128 0.000000 ... 0.000000 0.000000 0.000000
2 6.680865 18.304831 39.347559 ... 0.000000 0.000000 0.000000
3 3.027613 10.507617 26.490110 ... 0.000000 0.000000 0.000000
4 1.031831 5.115447 16.158711 ... 0.000000 0.000000 0.000000
5 0.200704 1.900287 8.479948 ... 0.000000 0.000000 0.000000
6 0.000000 0.410210 3.457511 ... 0.000000 0.000000 0.000000
7 0.000000 0.000000 0.838410 ... 0.000000 0.000000 0.000000
8 0.000000 0.000000 0.000000 ... 0.000000 0.000000 0.000000
9 0.000000 0.000000 0.000000 ... 0.000000 0.000000 0.000000
10 0.000000 0.000000 0.000000 ... 219.647445 0.000000 0.000000
11 0.000000 0.000000 0.000000 ... 187.822311 253.692707 0.000000
12 0.000000 0.000000 0.000000 ... 158.642030 218.978643 290.890352
[13 rows x 13 columns]
Planned for the upcoming versions:
- Trinomial Tree Option Pricing method
- Plots