blsprice (Financial Toolbox)

Black-Scholes put and call pricing

Syntax

[CallPrice, PutPrice] = blsprice(Price, Strike, Rate, Time, 
Volatility, DividendRate)

Arguments

Price
Current asset price.

Strike
Exercise price.

Rate
Risk-free interest rate. Enter as a decimal fraction.

Time
Time to maturity of the option in years.

Volatility
Standard deviation of the annualized continuously compounded rate of return of the asset (also known as the volatility).

DividendRate
(Optional) Dividend rate of the asset. Enter as a decimal fraction. Default = 0.

`Price`	Current asset price.
`Strike`	Exercise price.
`Rate`	Risk-free interest rate. Enter as a decimal fraction.
`Time`	Time to maturity of the option in years.
`Volatility`	Standard deviation of the annualized continuously compounded rate of return of the asset (also known as the volatility).
`DividendRate`	(Optional) Dividend rate of the asset. Enter as a decimal fraction. Default = 0.

Description

[CallPrice, PutPrice] = blsprice(Price, Strike, Rate, Time, Volatility, DividendRate)) returns the value of call and put options using the Black-Scholes pricing formula.

Note This function uses normcdf, the normal cumulative distribution function in the Statistics Toolbox.

Examples

The current price of an asset is $100, the exercise price of the option is $95, the risk-free interest rate is 10%, the time to maturity of the option is 0.25 years, and the standard deviation of the asset is 50%.

[CallPrice, PutPrice] = blsprice(100, 95, 0.1, 0.25, 0.5)

CallPrice =
         13.70
PutPrice =
          6.35

See Also

blkprice, blsdelta, blsgamma, blsimpv, blslambda, blsrho, blstheta, blsvega

References

Bodie, Kane, and Marcus, Investments, page 681.

blslambda blsrho