chalabi at phys.ethz.ch
Thu Jun 12 08:45:09 CEST 2008
>>>> "LD(" == Lüthi David (luda) <luda at zhaw.ch>
>>>> on Tue, 3 Jun 2008 18:03:12 +0200
LD(> Dear Rmetrics core
LD(> In the "d" term in the CashOrNothingOption-Function in the R-package fExoticOptions it is somewhat confusing to use b (instead of r?).
LD(> In my opinion it should be like
LD(> d = (log(S/X) + (r + b - sigma^2/2) * Time)/(sigma * sqrt(Time)),
LD(> resulting in the standard formula if there is no cost-of-carry. Do I mix things up?
LD(> Best regards, David
There might be some confusion with the definition of the parameters.
Could you please give me reference to literature which makes you think
that the formula is wrong.
I did not write the code, but I think they used the formula in "Haug,
Chapter 2.11.2". I do not have a copy of this book with me and thus
can not check it.
sorry for the late response,
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