A vanilla option is a financial instrument that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price within a given timeframe.
Where:
- C = call option price
- S = is the current stock (or other underlying) price
- K = is the strike price
- r = is the risk-free interest rate
- t = is the time to maturity
- N = denotes a normal distribution
Code:
- S = asset_price
- K = strike_price
- r = RFR
- t = mt
- N = erfc