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    The document contains MATLAB code for pricing European and American options using lattice methods. It includes functions for pricing European and American calls and puts with continuous or discrete dividends, using trinomial and binomial lattices. The functions construct lattices by moving backwards in time from the option expiration date to price the options.

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    hw7

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    The document contains MATLAB code for pricing European and American options using lattice methods. It includes functions for pricing European and American calls and puts with continuous or discrete dividends, using trinomial and binomial lattices. The functions construct lattices by moving backwards in time from the option expiration date to price the options.

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    © All Rights Reserved
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    24 views9 pages

    HW 7

    Uploaded by

    api-516646274
    The document contains MATLAB code for pricing European and American options using lattice methods. It includes functions for pricing European and American calls and puts with continuous or discrete dividends, using trinomial and binomial lattices. The functions construct lattices by moving backwards in time from the option expiration date to price the options.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    of 9

    Hw4

     LatticeEurCallDivP vs. LatticeAmCallDivP

    function [price, lattice] = LatticeEurCallDivP(S0,X,r,T,sigma,N,div,tau)

    deltaT = T/N;

    u=exp(sigma * sqrt(deltaT));

    d=1/u;

    p=(exp(r*deltaT) - d)/(u-d);

    lattice = zeros(N+1,N+1);

    for j=0:N

    lattice(N+1,j+1)=max(0 , S0*(u^j)*(d^(N-j))*(1-div)-X);

    end

    for i=N-1:-1:tau
    for j=0:i

    lattice(i+1,j+1) = exp(-r*deltaT) *(p * lattice(i+2,j+2) + (1-p) *

    lattice(i+2,j+1));

    end

    end

    for i=tau-1:-1:0

    for j=0:i

    lattice(i+1,j+1) = exp(-r*deltaT) *(p * lattice(i+2,j+2) + (1-p) *

    lattice(i+2,j+1));

    end

    end

    price = lattice(1,1);

    end

    ---------------------------------------------------------------------
    function [price, lattice] = LatticeAmCallDivP(S0,X,r,T,sigma,N,div,tau)

    deltaT = T/N;

    u=exp(sigma * sqrt(deltaT));

    d=1/u;

    p=(exp(r*deltaT) - d)/(u-d);

    lattice = zeros(N+1,N+1);

    for j=0:N

    lattice(N+1,j+1)=max(0 , S0*(u^j)*(d^(N-j))*(1-div)-X);

    end

    for i=N-1:-1:tau

    for j=0:i

    lattice(i+1,j+1) = max( S0*u^j*d^(i-j)*(1-div) -X, ...

    exp(-r*deltaT) *(p * lattice(i+2,j+2) + (1-p) * lattice(i+2,j+1)));

    end

    end

    for i=tau-1:-1:0

    for j=0:i

    lattice(i+1,j+1) = max( S0*u^j*d^(i-j) -X, ...

    exp(-r*deltaT) *(p * lattice(i+2,j+2) + (1-p) * lattice(i+2,j+1)));

    end

    end

    price = lattice(1,1);
    end

     LatticeEurPutDivP

    function [price, lattice] = LatticeEurPutDivP(S0,X,r,T,sigma,N,div,tau)

    deltaT = T/N;

    u=exp(sigma * sqrt(deltaT));

    d=1/u;

    p=(exp(r*deltaT) - d)/(u-d);

    lattice = zeros(N+1,N+1);

    for j=0:N

    lattice(N+1,j+1)=max(0 , X-S0*(u^j)*(d^(N-j))*(1-div));

    end

    for i=N-1:-1:tau

    for j=0:i

    lattice(i+1,j+1) = exp(-r*deltaT) *(p * lattice(i+2,j+2) + (1-p) *

    lattice(i+2,j+1));

    end

    end

    for i=tau-1:-1:0

    for j=0:i

    lattice(i+1,j+1) = exp(-r*deltaT) *(p * lattice(i+2,j+2) + (1-p) *

    lattice(i+2,j+1));

    end

    end

    price = lattice(1,1);
    end

    Hw5
     LatticeEurCallDivD vs. LatticeAmCallDivD

    function [price, lattice] = LatticeEurCallDivD(S0,X,r,T,sigma,N,D,tau)

    deltaT = T/N;

    u=exp(sigma * sqrt(deltaT));

    d=1/u;

    p=(exp(r*deltaT) - d)/(u-d);

    S0a=S0-D*exp(-r*tau*deltaT);

    lattice = zeros(N+1,N+1);
    for j=0:N

    lattice(N+1,j+1)=max(0 , S0a*(u^j)*(d^(N-j))-X);

    end

    for i=N-1:-1:tau

    for j=0:i

    lattice(i+1,j+1) = exp(-r*deltaT) *(p * lattice(i+2,j+2) + (1-p) *

    lattice(i+2,j+1));

    end

    end

    for i=tau-1:-1:0

    for j=0:i

    lattice(i+1,j+1) = exp(-r*deltaT) *(p * lattice(i+2,j+2) + (1-p) *

    lattice(i+2,j+1));

    end

    end

    price = lattice(1,1);

    end

    -------------------------------------------------------
    function [price, lattice] = LatticeAmCallDivD(S0,X,r,T,sigma,N,D,tau)

    deltaT = T/N;

    u=exp(sigma * sqrt(deltaT));

    d=1/u;

    p=(exp(r*deltaT) - d)/(u-d);

    S0a=S0-D*exp(-r*tau*deltaT);

    lattice = zeros(N+1,N+1);

    for j=0:N

    lattice(N+1,j+1)=max(0 , S0a*(u^j)*(d^(N-j))-X);

    end

    for i=N-1:-1:tau

    for j=0:i

    lattice(i+1,j+1) = max( S0a*u^j*d^(i-j)-X , ...

    exp(-r*deltaT) *(p * lattice(i+2,j+2) + (1-p) * lattice(i+2,j+1)));

    end

    end

    for i=tau-1:-1:0
    for j=0:i lattice(i+1,j+1) = max( S0a*u^j*d^(i-j)-D*exp(-r*(tau-i)*deltaT)-X ,

    ...

    exp(-r*deltaT) *(p * lattice(i+2,j+2) + (1-p) * lattice(i+2,j+1)));

    end

    end

    price = lattice(1,1);

     LatticeEurPutDivD

    function [price, lattice] = LatticeEurPutDivD(S0,X,r,T,sigma,N,D,tau)

    deltaT = T/N;

    u=exp(sigma * sqrt(deltaT));

    d=1/u;

    p=(exp(r*deltaT) - d)/(u-d);

    S0a=S0-D*exp(-r*tau*deltaT);

    lattice = zeros(N+1,N+1);

    for j=0:N

    lattice(N+1,j+1)=max(0 , X-S0a*(u^j)*(d^(N-j)));

    end

    for i=N-1:-1:tau
    for j=0:i

    lattice(i+1,j+1) = exp(-r*deltaT) *(p * lattice(i+2,j+2) + (1-p) *

    lattice(i+2,j+1));

    end

    end

    for i=tau-1:-1:0

    for j=0:i

    lattice(i+1,j+1) = exp(-r*deltaT) *(p * lattice(i+2,j+2) + (1-p) *

    lattice(i+2,j+1));

    end

    end

    price = lattice(1,1);

    end

    Hw6
     TriEurPut

    function [price, lattice] = TriEurPut(S0,X,r,T,sigma,N,lamda)

    deltaT = T/N;

    u=exp(lamda*sigma * sqrt(deltaT));

    d=1/u;

    pu=1/(2*lamda^2)+(r-(sigma^2/2))*sqrt(deltaT)/(2*lamda*sigma);

    pm=1-1/(lamda^2);

    pd=1-pu-pm;

    lattice = zeros(N+1,2*N+1);
    for j=1:N+1

    lattice(N+1,j)=max(0 , X-S0*(d^(N-j+1)) );

    end

    for j=N+2:2*N+1

    lattice(N+1,j)=max(0 , X-S0*(u^(j-N-1)) );

    end

    for i=N-1:-1:0

    for j=1:2*i+1

    lattice(i+1,j) = exp(-r*deltaT) * ...

    (pd * lattice(i+2,j) + pm * lattice(i+2,j+1)+ ...

    pu*lattice(i+2,j+2));

    end

    end

    price = lattice(1,1);

    end

     TriAmPut

    function [price, lattice] = TriAmPut(S0,X,r,T,sigma,N,lamda)

    deltaT = T/N;

    u=exp(lamda*sigma * sqrt(deltaT));

    d=1/u;

    pu=1/(2*lamda^2)+(r-(sigma^2/2))*sqrt(deltaT)/(2*lamda*sigma);

    pm=1-1/(lamda^2);

    pd=1-pu-pm;

    lattice = zeros(N+1,2*N+1);
    for j=1:N+1

    lattice(N+1,j)=max(0 , X-S0*(d^(N-j+1)) );

    end

    for j=N+2:2*N+1

    lattice(N+1,j)=max(0 , X-S0*(u^(j-N-1)) );

    end

    for i=N-1:-1:0

    for j=1:2*i+1

    lattice(i+1,j) = exp(-r*deltaT) *(pd * lattice(i+2,j) + pm *

    lattice(i+2,j+1)+pu*lattice(i+2,j+2));

    end

    end

    price = lattice(1,1);

    end

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