Interest-rate term structure (annualized and continuously compounded), specified by
the RateSpec obtained from intenvset. For information on the interest-rate specification, see
intenvset.
Data Types: struct
StockSpec — Stock specification for underlying asset structure
Stock specification for the underlying asset. For information on the stock
specification, see stockspec.
stockspec handles several types of
underlying assets. For example, for physical commodities, the price is
StockSpec.Asset, the volatility is
StockSpec.Sigma, and the convenience yield is
StockSpec.DividendAmounts.
Data Types: struct
Settle — Settlement or trade date serial date number | date character vector | datetime object
Settlement or trade date for the touch option, specified as an
NINST-by-1 matrix using serial date numbers,
date character vectors, or datetime objects.
Data Types: double | char | datetime
Maturity — Maturity date serial date number | date character vector
Maturity date for the touch option, specified as an
NINST-by-1 vector of serial date numbers or date
character vectors.
Data Types: double | char | cell
BarrierSpec — Barrier option type character vector with values 'OT' or
'NT'
Barrier option type, specified as an
NINST-by-1 cell array of character vectors with
the following values:
'OT' — One-touch
The one-touch option provides a payoff if the underlying asset ever trades at
or beyond the Barrier level. Otherwise, the
Payoff is zero.
'NT' — No-touch
The no-touch option provides a Payoff if the underlying
asset never trades at or beyond the Barrier level. Otherwise,
the Payoff is zero.
Data Types: char | cell
Barrier — Barrier value numeric
Barrier value, specified as an NINST-by-1
matrix of numeric values.
Data Types: double
Payoff — Payoff value numeric
Payoff value, specified as an NINST-by-1
matrix of numeric values.
Note
The payoff value is calculated for the point in time that the
Barrier value is reached. The payoff is either cash or
nothing. If a no-touch option is specified using the
BarrierSpec, the payoff is at the
Maturity of the option.
The one-touch and no-touch options provide a payoff if the underlying
spot either ever or never trades at or beyond the barrier level. Otherwise, the payoff is
zero.
Only two outcomes are possible with a one-touch option if a trader holds the contract
all the way through expiration:
The target price (Barrier) is reached and the trader collects
the full premium.
The target price (Barrier) is not reached and the trader
loses the amount originally paid to open the trade.
References
[1] Haug, E. The Complete
Guide to Option Pricing Formulas. McGraw-Hill Education, 2007.
[2] Wystup, U. FX Options
and Structured Products. Wiley Finance, 2007.
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