Documentation |
Black-Scholes sensitivity to underlying price volatility
Vega = blsvega(Price, Strike, Rate, Time, Volatility, Yield)
Price | Current price of the underlying asset. |
Strike | Exercise price of the option. |
Rate | Annualized, continuously compounded risk-free rate of return over the life of the option, expressed as a positive decimal number. |
Time | Time to expiration of the option, expressed in years. |
Volatility | Annualized asset price volatility (annualized standard deviation of the continuously compounded asset return), expressed as a positive decimal number. |
Yield | (Optional) Annualized, continuously compounded yield of the underlying asset over the life of the option, expressed as a decimal number. (Default = 0.) For example, for options written on stock indices, Yield could represent the dividend yield. For currency options, Yield could be the foreign risk-free interest rate. |
Vega = blsvega(Price, Strike, Rate, Time, Volatility, Yield) returns Vega, the rate of change of the option value with respect to the volatility of the underlying asset. blsvega uses normpdf, the normal probability density function in the Statistics Toolbox™.
Note: blsvega can handle other types of underlies like Futures and Currencies. When pricing Futures (Black model), enter the input argument Yield as: Yield = Rate When pricing currencies (Garman-Kohlhagen model), enter the input argument Yield as: Yield = ForeignRate where ForeignRate is the continuously compounded, annualized risk free interest rate in the foreign country. |