Sunday, March 2, 2008

Options Pricing Hobby


After reading John C. Hull's Options, Futures, and Other Derivatives for some time now, I was inspired to write a small program to value some plain "vanilla" options. To the right is a screen shot of the program. You can download it here, but I have yet to actually test the installer, so I'm not guaranteeing anything. It's a bloated way to distribute this, but I was a little lazy.

Hopefully the interface is straightforward enough. Choose a style of option, currently limited to European, American and Bermudan, and input the required information to value them. The American and Bermudan estimations are based on a binomial tree approximation, and the European is a simple Black-Scholes formula plug-in.

I was helped by a couple resources:
http://finance.bi.no/~bernt/gcc_prog/recipes/recipes/node1.html
http://qlink.queensu.ca/~2mhr/programming-project-binomial-model.pdf

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