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This program calculates the price of a x-year American-style (put or call) option on a zero-coupon bond that matures at year y with a par value of 1 dollar.

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pontazaricardo/Finance_American_Zero-coupon-bond

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Finance_American_Zero-coupon-bond

This program calculates the price of a x-year American-style (put or call) option on a zero-coupon bond that matures at year y with a par value of 1 dollar. There are two files, one for calculating the put and the second one for the call.

demo

Inputs and outputs

  1. Inputs: x (year), y (year), r (%) (initial short rate), betta (%) and mu (%), sigma (%) and number of partitions during the option's life n, and strike price X (% of par).
  2. Output: Price of the put or the call (depending on the selected file).

Notes

The folder Main includes two files:

  1. American_zero_coupon_put.m
  2. American_zero_coupon_call.m

Just run the file you need for calculating a put or call price.

Execution

In MatLab, just run the given files.

Example

Put

Suppose x = 1, y = 2, r = 4(%), betta = 20(%), mu = 4(%), sigma = 10(%), n = 30 and X = 90(%). The price of the put is 0.0167024.

demo

Call

Again, suppose that x = 1, y = 2, r = 4(%), betta = 20(%), mu = 4(%), sigma = 10(%), n = 30 and X = 90(%). The price of a call is 5.87267.

demo

About

This program calculates the price of a x-year American-style (put or call) option on a zero-coupon bond that matures at year y with a par value of 1 dollar.

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