OS_Binomial (Function)

Disclaimer

The OS_Binomial function is used to calculate the theoretical value of on option using the Binomial option pricing algorithm.

Syntax

OS_Binomial(AssetPr, StrikePr, Volty, DaysToExp, IntRate, Carry, OptType, EuroAmer01, Branches, oBinoTV) ;

Return Value

A numeric value of 0, if successful, or1, if not successful.  The theoretical value of the option is returned to the caller (by reference) in the variable oBinoTV.

Parameters

Name	Type	Description
AssetPr	Numeric	Specifies the price of underlying asset.
StrikePr	Numeric	Specifies the strike price of the option.
Volty	Numeric	Volatility of the underlying asset expressed as a decimal number that represents a percentage (e.g., 0.35 for 35%).
DaysToExp	Numeric	Days left until expiration of the option.
IntRate	Numeric	Risk-free short-term interest rate, usually the 90-day T-Bill rate.
Carry	Numeric	Broker fees for margin accounts. Expressed as a decimal number that represents a percentage (e.g., 0.06 for 6%).
OptType	Numeric	Specifies type of option: 2 for a Put, 3 for a Call, or the reserved words Put and Call, which have the values 2 and 3, respectively, can be used.
EuroAmer01	Numeric	Type of options where 0 = European Options and 1 = American options.
Branches	Numeric	Number of binomial branches (iterations) the function calculates. The more branches used, the slower the calculation. For end-of-day values, use 50; for real time values, use 10 to 20.
oBinoTV	Numeric	Output variable, passed by reference by the calling study. Following calculation this variable will contain the theoretical value of the option.

 

Example

The EasyLanguage code below assigns to the variable oBinoValue the theoretical price of an option with the following characteristics, under the conditions specified below:

• An underlying asset price of $97.25

• An option strike price of $100

• An underlying volatility of 32.5%

• With 30 days until expiration

• Using a risk free interest rate of 5.0%

• Using a carrying cost rate of 6.0%

• For a call option

• Of American style

• Using 50 calculation iterations

 

variables: oBinoValue(0);

Value1 = OS_Binomial( 97.25, 100, 0.325, 30, 0.05, 0.06, Call, 1, 50, oBinoValue);