webcab.lib.finance.options
Class EuropeanVega

java.lang.Object
  |
  +--webcab.lib.finance.options.EuropeanVega

All Implemented Interfaces:

Serializable

public class EuropeanVega

extends Object

implements Serializable

Within this class we consider the evaluation of the Vega of a European option on equities, equity indexes, currencies and future contracts in accordance with the classical Black-Scholes model.

Recall that the Vega of an option contract is the rate of change (i.e. the first derivative) of the option with respect to changes in the volatility of the underlying asset.

See Also:

Serialized Form

Constructor Summary

EuropeanVega()
Creates a new instance.

Method Summary

double	optionVega(double stockPrice, double strike, double riskFreeRate, double volatility, Date evaluationDate, Date maturityDate, BusinessCalendar businessCalendar) This method returns the Vega of a European call or put option on a non-dividend paying stock.
double	optionVega(double stockPrice, double strike, double riskFreeRate, double volatility, double timeToMaturity) This method returns the Vega of a European call or put option on a non-dividend paying stock.
double	optionVegaOnCurrency(double foreignRiskFree, double exchangeRate, double strike, double riskFreeRate, double volatility, Date evaluationDate, Date maturityDate, BusinessCalendar businessCalendar) Evaluates the Vega of a European call or put option on a currency.
double	optionVegaOnCurrency(double foreignRiskFree, double exchangeRate, double strike, double riskFreeRate, double volatility, double timeToMaturity) Evaluates the Vega of a European call or put option on a currency.
double	optionVegaOnFutures(double futuresPrice, double strike, double riskFreeRate, double volatility, Date evaluationDate, Date maturityDate, BusinessCalendar businessCalendar) Evaluates the Vega of a European call or put option on a futures contract.
double	optionVegaOnFutures(double futuresPrice, double strike, double riskFreeRate, double volatility, double timeToMaturity) Evaluates the Vega of a European call or put option on a futures contract.
double	optionVegaOnIndex(double yield, double indexValue, double strike, double riskFreeRate, double volatility, Date evaluationDate, Date maturityDate, BusinessCalendar businessCalendar) Evaluates the Vega of a European call or put option on an index.
double	optionVegaOnIndex(double yield, double indexValue, double strike, double riskFreeRate, double volatility, double timeToMaturity) Evaluates the Vega of a European call or put option on an index.
double	optionVegaWithYield(double yield, double stockPrice, double strike, double riskFreeRate, double volatility, Date evaluationDate, Date maturityDate, BusinessCalendar businessCalendar) This method returns the Vega of a European call or put option on a stock which pays a continuous dividend.
double	optionVegaWithYield(double yield, double stockPrice, double strike, double riskFreeRate, double volatility, double timeToMaturity) This method returns the Vega of a European call or put option on a stock which pays a continuous dividend.

Methods inherited from class java.lang.Object

clone, equals, finalize, getClass, hashCode, notify, notifyAll, toString, wait, wait, wait

Constructor Detail

EuropeanVega

public EuropeanVega()

Creates a new instance.

Method Detail

optionVega

public double optionVega(double stockPrice,
                         double strike,
                         double riskFreeRate,
                         double volatility,
                         Date evaluationDate,
                         Date maturityDate,
                         BusinessCalendar businessCalendar)
                  throws EuropeanVegaDemoException

This method returns the Vega of a European call or put option on a non-dividend paying stock.

Parameters:

stockPrice - the price of the underlying stock

strike - the strike of the option contract

riskFreeRate - the continuously compounded risk free interest rate

volatility - the volatility of the underlying asset

evaluationDate - the date when the Vega of the option contract is evaluated

maturityDate - the date when the option matures

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

EuropeanVegaDemoException

optionVega

public double optionVega(double stockPrice,
                         double strike,
                         double riskFreeRate,
                         double volatility,
                         double timeToMaturity)
                  throws EuropeanVegaDemoException

This method returns the Vega of a European call or put option on a non-dividend paying stock.

Parameters:

stockPrice - the price of the underlying stock

strike - the strike of the option contract

riskFreeRate - the continuously compounded risk free interest rate

volatility - the volatility of the underlying asset

timeToMaturity - the time until the option contract expires

EuropeanVegaDemoException

optionVegaWithYield

public double optionVegaWithYield(double yield,
                                  double stockPrice,
                                  double strike,
                                  double riskFreeRate,
                                  double volatility,
                                  Date evaluationDate,
                                  Date maturityDate,
                                  BusinessCalendar businessCalendar)
                           throws EuropeanVegaDemoException

This method returns the Vega of a European call or put option on a stock which pays a continuous dividend.

Parameters:

yield - the continuous yield of the underlying asset

stockPrice - the price of the underlying stock

strike - the strike of the option contract

riskFreeRate - the continuously compounded risk free interest rate

volatility - the volatility of the underlying asset

evaluationDate - the date when the Vega of the option contract is evaluated

maturityDate - the date when the option matures

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

EuropeanVegaDemoException

optionVegaWithYield

public double optionVegaWithYield(double yield,
                                  double stockPrice,
                                  double strike,
                                  double riskFreeRate,
                                  double volatility,
                                  double timeToMaturity)
                           throws EuropeanVegaDemoException

This method returns the Vega of a European call or put option on a stock which pays a continuous dividend.

Parameters:

yield - the continuous yield of the underlying asset

stockPrice - the price of the underlying stock

strike - the strike of the option contract

riskFreeRate - the continuously compounded risk free interest rate

volatility - the volatility of the underlying asset

timeToMaturity - the time until the option contract expires (in years)

EuropeanVegaDemoException

optionVegaOnIndex

public double optionVegaOnIndex(double yield,
                                double indexValue,
                                double strike,
                                double riskFreeRate,
                                double volatility,
                                Date evaluationDate,
                                Date maturityDate,
                                BusinessCalendar businessCalendar)
                         throws EuropeanVegaDemoException

Evaluates the Vega of a European call or put option on an index.

Parameters:

yield - the average yield of the constituents of the index

indexValue - the value of the index

strike - the value of the index as which the option settles

riskFreeRate - continuously compounded risk free interest rate

volatility - the volatility of the underlying asset

evaluationDate - the date when the Vega of the option contract is evaluated

maturityDate - the date when the option matures

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

EuropeanVegaDemoException

optionVegaOnIndex

public double optionVegaOnIndex(double yield,
                                double indexValue,
                                double strike,
                                double riskFreeRate,
                                double volatility,
                                double timeToMaturity)
                         throws EuropeanVegaDemoException

Evaluates the Vega of a European call or put option on an index.

Parameters:

yield - the average yield of the constituents of the index

indexValue - the value of the index

strike - the value of the index as which the option settles

riskFreeRate - continuously compounded risk free interest rate

volatility - the volatility of the underlying asset

timeToMaturity - the time until the option expires

EuropeanVegaDemoException

optionVegaOnCurrency

public double optionVegaOnCurrency(double foreignRiskFree,
                                   double exchangeRate,
                                   double strike,
                                   double riskFreeRate,
                                   double volatility,
                                   Date evaluationDate,
                                   Date maturityDate,
                                   BusinessCalendar businessCalendar)
                            throws EuropeanVegaDemoException

Evaluates the Vega of a European call or put option on a currency.

Parameters:

foreignRiskFree - the continuously compounded risk free interest rate in the foreign currency

exchangeRate - the present exchange rate

strike - the exchange rate at which the option can be exercised

riskFreeRate - the risk free interest rate in the base currency

volatility - the volatility of the exchange rate

evaluationDate - the date when the Vega of the option contract is evaluated

maturityDate - the date when the option matures

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

EuropeanVegaDemoException

optionVegaOnCurrency

public double optionVegaOnCurrency(double foreignRiskFree,
                                   double exchangeRate,
                                   double strike,
                                   double riskFreeRate,
                                   double volatility,
                                   double timeToMaturity)
                            throws EuropeanVegaDemoException

Evaluates the Vega of a European call or put option on a currency.

Parameters:

foreignRiskFree - the continuously compounded risk free interest rate in the foreign currency

exchangeRate - the present exchange rate

strike - the exchange rate at which the option can be exercised

riskFreeRate - the risk free interest rate in the base currency

volatility - the volatility of the exchange rate

timeToMaturity - the time until the option expires

EuropeanVegaDemoException

optionVegaOnFutures

public double optionVegaOnFutures(double futuresPrice,
                                  double strike,
                                  double riskFreeRate,
                                  double volatility,
                                  Date evaluationDate,
                                  Date maturityDate,
                                  BusinessCalendar businessCalendar)
                           throws EuropeanVegaDemoException

Evaluates the Vega of a European call or put option on a futures contract.

Parameters:

futuresPrice - the futures price at time zero

strike - the value of the futures contract at which option can be exercised

riskFreeRate - the risk free interest rate

volatility - volatility of the futures contract

evaluationDate - the date when the Vega of the option contract is evaluated

maturityDate - the date when the option matures

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

EuropeanVegaDemoException

optionVegaOnFutures

public double optionVegaOnFutures(double futuresPrice,
                                  double strike,
                                  double riskFreeRate,
                                  double volatility,
                                  double timeToMaturity)
                           throws EuropeanVegaDemoException

Evaluates the Vega of a European call or put option on a futures contract.

Parameters:

futuresPrice - the futures price at time zero

strike - the value of the futures contract at which option can be exercised

riskFreeRate - the risk free interest rate

volatility - volatility of the futures contract

timeToMaturity - the time to maturity of the option (in years)

EuropeanVegaDemoException