IkedaKunitomo

Create IkedaKunitomo pricer object for DoubleBarrier instrument using BlackScholes model

Description

Create and price a DoubleBarrier instrument object with a BlackScholes model and a IkedaKunitomo pricing method using this workflow:

1. Use fininstrument to create a DoubleBarrier instrument object.

2. Use finmodel to specify a BlackScholes model for the DoubleBarrier instrument object.

3. Use finpricer to specify a IkedaKunitomo pricer object for the DoubleBarrier instrument object.

For more information on this workflow, see Get Started with Workflows Using Object-Based Framework for Pricing Financial Instruments.

For more information on the available instruments, models, and pricing methods for a DoubleBarrier instrument, see Choose Instruments, Models, and Pricers.

Creation

Syntax

IkedaKunitomoPricerObj = finpricer(PricerType,'Model',model,'DiscountCurve',ratecurve_obj,'SpotPrice',spotprice_value)

IkedaKunitomoPricerObj = finpricer(___,Name,Value)

Description

IkedaKunitomoPricerObj = finpricer(PricerType,'Model',model,'DiscountCurve',ratecurve_obj,'SpotPrice',spotprice_value) creates a IkedaKunitomo pricer object by specifying PricerType and sets properties using the required name-value pair arguments Model, DividendType, and SpotPrice.

IkedaKunitomoPricerObj = finpricer(___,Name,Value) sets optional properties using additional name-value pairs in addition to the required arguments in the previous syntax. For example, IkedaKunitomoPricerObj = finpricer("Analytic",'Model',BSModel,'DiscountCurve',ratecurve_obj,'SpotPrice',100,'DividendValue',0.025,'PricingMethod',"IkedaKunitomo") creates a IkedaKunitomo pricer object. You can specify multiple name-value pair arguments.

Input Arguments

PricerType — Pricer type

string with value "Analytic" | character vector with value 'Analytic'

Pricer type, specified as a string with the value "Analytic" or a character vector with the value 'Analytic'.

Data Types: char | string

Name-Value Arguments

Specify required and optional pairs of arguments as Name1=Value1,...,NameN=ValueN, where Name is the argument name and Value is the corresponding value. Name-value arguments must appear after other arguments, but the order of the pairs does not matter.

Before R2021a, use commas to separate each name and value, and enclose Name in quotes.

Example: IkedaKunitomoPricerObj = finpricer("Analytic",'Model',BSModel,'DiscountCurve',ratecurve_obj,'SpotPrice',100,'DividendValue',0.025,'PricingMethod',"IkedaKunitomo")

Required IkedaKunitomo Name-Value Pair Arguments

Model — IkedaKunitomo model object

object

Model object, specified as the comma-separated pair consisting of 'Model' and the name of a previously created BlackScholes model object using finmodel.

Data Types: object

DiscountCurve — ratecurve object for discounting cash flows

ratecurve object

ratecurve object for discounting cash flows, specified as the comma-separated pair consisting of 'DiscountCurve' and the name of the previously created ratecurve object.

Note

Specify a flat ratecurve object for DiscountCurve.

Data Types: object

SpotPrice — Current price of underlying asset

scalar nonnegative numeric

Current price of the underlying asset, specified as the comma-separated pair consisting of 'SpotPrice' and a scalar nonnegative numeric value.

Data Types: double

Optional IkedaKunitomo Name-Value Pair Arguments

DividendValue — Dividend yield

0 (default) | scalar nonnegative numeric

Dividend yield, specified as the comma-separated pair consisting of 'DividendValue' and a scalar nonnegative numeric value.

Data Types: double

DividendType — Dividend type

"continuous" (default) | string with value "continuous" | character vector with value 'continuous'

Dividend type, specified as the comma-separated pair consisting of 'DividendType' and string or character vector.

Data Types: char | string

Curvature — Curvature levels of the upper and lower barriers

[0 0] (default) | vector

Curvature levels of the upper and lower barriers, specified as the comma-separated pair consisting of 'Curvature' and a vector where the first level is the upper barrier curvature (d1) and second level is the lower barrier curvature (d2). The possible curvature levels are as follows:

• d1 = d2 = 0 corresponds to two flat boundaries.

• d1 < 0 < d2 corresponds to an exponentially growing lower boundary and an exponentially decaying upper boundary.

• d1 > 0 > d2 corresponds to a convex downward lower boundary and a convex upward upper boundary.

Data Types: char | string

PricingMethod — Analytic pricing method

default pricer associated with BlackScholes model (default) | string with value "IkedaKunitomo" | character vector with value 'IkedaKunitomo'

Analytic pricing method, specified as the comma-separated pair consisting of 'PricingMethod' and a character vector or string.

Note

The default pricing method for a BlackScholes model is a BlackScholes pricer.

Data Types: string | char

Output Arguments

IkedaKunitomoPricerObj — Ikeda-Kunitomo pricer

IkedaKunitomo object

Ikeda-Kunitomo pricer, returned as a IkedaKunitomo object.

Properties

Model — Model

model object

Model, returned as a model object.

Data Types: object

DiscountCurve — ratecurve object for discounting cash flows

Read-only: ratecurve object

This property is read-only.

ratecurve object for discounting cash flows, returned as a ratecurve object.

Data Types: object

SpotPrice — Current price of underlying asset

nonnegative numeric

Current price of the underlying asset, returned as a scalar nonnegative numeric value.

Data Types: double

DividendValue — Dividend yield

0 (default) | scalar nonnegative numeric

Dividend yield, returned as a scalar nonnegative numeric.

Data Types: double

DividendType — Dividend type

Read-only: "continuous" (default) | string with value "continuous"

This property is read-only.

Dividend type, returned as a string.

Data Types: string

Curvature — Curvature levels of the upper and lower barriers

[0 0] (default) | vector

Curvature levels of the upper and lower barriers, returned as a vector where the first level is the upper barrier curvature (d1) and second level is the lower barrier curvature (d2).

Data Types: char | string

PricingMethod — Analytic pricing method

default pricer associated with BlackScholes model (default) | string with value "IkedaKunitomo"

Analytic pricing method, returned as a string.

Data Types: string

Object Functions

price

Compute price for interest-rate, equity, or credit derivative instrument with Analytic pricer

Examples

Use IkedaKunitomo Pricer and BlackScholes Model to Price DoubleBarrier Instrument

This example shows the workflow to price a DoubleBarrier instrument when you use a BlackScholes model and an IkedaKunitomo pricing method.

Create DoubleBarrier Instrument Object

Use fininstrument to create a DoubleBarrier instrument object.

DoubleBarrierOpt = fininstrument("DoubleBarrier",'Strike',100,'ExerciseDate',datetime(2020,8,15),'OptionType',"call",'ExerciseStyle',"European",'BarrierType',"DKO",'BarrierValue',[110 80],'Name',"doublebarrier_option")

DoubleBarrierOpt = 
  DoubleBarrier with properties:

       OptionType: "call"
           Strike: 100
     BarrierValue: [110 80]
    ExerciseStyle: "european"
     ExerciseDate: 15-Aug-2020
      BarrierType: "dko"
           Rebate: [0 0]
             Name: "doublebarrier_option"

Create BlackScholes Model Object

Use finmodel to create a BlackScholes model object.

BlackScholesModel = finmodel("BlackScholes","Volatility",.3)

BlackScholesModel = 
  BlackScholes with properties:

     Volatility: 0.3000
    Correlation: 1

Create ratecurve Object

Create a flat ratecurve object using ratecurve.

Settle = datetime(2017,9,15);
Maturity = datetime(2023,9,15);
Rate = 0.035;
myRC = ratecurve('zero',Settle,Maturity,Rate,'Basis',12)

myRC = 
  ratecurve with properties:

                 Type: "zero"
          Compounding: -1
                Basis: 12
                Dates: 15-Sep-2023
                Rates: 0.0350
               Settle: 15-Sep-2017
         InterpMethod: "linear"
    ShortExtrapMethod: "next"
     LongExtrapMethod: "previous"

Create IkedaKunitomo Pricer Object

Use finpricer to create an IkedaKunitomo pricer object and use the ratecurve object for the 'DiscountCurve' name-value pair argument.

outPricer = finpricer("Analytic","DiscountCurve",myRC,"Model",BlackScholesModel,'SpotPrice',100,'Curvature',[0.03 -0.03],'DividendValue',0.029,"PricingMethod","IkedaKunitomo")

outPricer = 
  IkedaKunitomo with properties:

    DiscountCurve: [1×1 ratecurve]
            Model: [1×1 finmodel.BlackScholes]
        SpotPrice: 100
    DividendValue: 0.0290
     DividendType: "continuous"
        Curvature: [0.0300 -0.0300]

Price DoubleBarrier Instrument

Use price to compute the price and sensitivities for the DoubleBarrier instrument.

[Price, outPR] = price(outPricer,DoubleBarrierOpt,["all"])

Price = 
5.6848e-04

outPR = 
  priceresult with properties:

       Results: [1×7 table]
    PricerData: []

outPR.Results 

ans=1×7 table
      Price          Delta          Gamma       Lambda       Vega         Theta          Rho    
    __________    ___________    ___________    _______    _________    _________    ___________

    0.00056848    -3.7713e-05    -4.2071e-06    -6.6339    -0.031332    0.0008912    -0.00035113

More About

Ikeda-Kunitomo Pricing Method

The Ikeda-Kunitomo pricing method is a numerical approach used in quantitative finance for path-dependent options, which have payoffs that depend on the average price of the underlying asset over a certain period rather than just the terminal price at expiration.

Version History

Introduced in R2020b