Bowmain Consulting

Hobhouse - European Digitals

Part of Project Denning

Back

European Digital Call

Description

A European Digital Call can only be exercise at maturity. The payout is fixed amount R if S > K at maturity, where S is the value of the underlying at maturity and K is the strike of the option. A European Digital Call is worthless at maturity if the value of the underlying is less than the strike.

Interfaces

Models must support IEuropeanDigitalCall.

	interface IEuropeanDigitalCall
	{
		[propput] HRESULT TimeUntilExpiry([in] double TimeUntilExpiry);
		[propput] HRESULT Strike([in] double Strike);
		[propput] HRESULT Spot([in] double Spot);
		[propput] HRESULT Rate([in] double Rate);
		[propput] HRESULT Volatility([in] double Volatility);

		[propget] HRESULT PV([out, retval] double* Value);
		[propget] HRESULT Delta([out, retval] double* Value);
		[propget] HRESULT Gamma([out, retval] double* Value);
		[propget] HRESULT Theta([out, retval] double* Value);
		[propget] HRESULT Vega([out, retval] double* Value);
	}

Models

The following models are available.

1. Analytic formula (Black-Scholes)
2. Binomial Tree

European Digital Put

Description

A European Digital Put can only be exercise at maturity. The payout is fixed amount R if S < K at maturity, where S is the value of the underlying at maturity and K is the strike of the option. A European Digital Put is worthless at maturity if the value of the underlying is greater than the strike.

Interfaces

Models must support IEuropeanDigitalCall.

	interface IEuropeanDigitalCall
	{
		[propput] HRESULT TimeUntilExpiry([in] double TimeUntilExpiry);
		[propput] HRESULT Strike([in] double Strike);
		[propput] HRESULT Spot([in] double Spot);
		[propput] HRESULT Rate([in] double Rate);
		[propput] HRESULT Volatility([in] double Volatility);

		[propget] HRESULT PV([out, retval] double* Value);
		[propget] HRESULT Delta([out, retval] double* Value);
		[propget] HRESULT Gamma([out, retval] double* Value);
		[propget] HRESULT Theta([out, retval] double* Value);
		[propget] HRESULT Vega([out, retval] double* Value);
	}

Models

The following models are available.

1. Analytic formula (Black-Scholes)
2. Binomial Tree

European Double Digital

Description

A European Double Digital can only be exercise at maturity. The payout is a fixed amount R if S > K1 and S < K2 where S is the value of the underlying at maturity and K1 and K2 are the option strikes. A European Double Digital is worthless at maturity if the value of the underlying is outside the range K1 to K2.

Interfaces

Models must support IEuropeanDoubleDigital.

	interface IEuropeanDoubleDigital
	{
		[propput] HRESULT TimeUntilExpiry([in] double TimeUntilExpiry);
		[propput] HRESULT LowerStrike([in] double LowerStrike);
		[propput] HRESULT UpperStrike([in] double UpperStrike); 
		[propput] HRESULT Spot([in] double Spot);
		[propput] HRESULT Rate([in] double Rate);
		[propput] HRESULT Volatility([in] double Volatility);

		[propget] HRESULT PV([out, retval] double* Value);
		[propget] HRESULT Delta([out, retval] double* Value);
		[propget] HRESULT Gamma([out, retval] double* Value);
		[propget] HRESULT Theta([out, retval] double* Value);
		[propget] HRESULT Vega([out, retval] double* Value);
	}

Models

The following models are available.

1. Analytic formula (Black-Scholes)
2. Binomial Tree  

Copyright Bowmain Ltd (c) 2005 .