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2007 Oct 16
0
Simple plot of IR and option prices
...ce to the put price to show how the option price varies relative to interest rates. Kind of a see-saw like graph. I need to keep this simple because this is meant to teach the absolute basics about the effects of interest rates on option prices. These are the option prices I'm using: CallPrice1<-CRRBinomialTreeOption(TypeFlag="ca",S=20, X=20, Time=1/12, r=0.0, b=0.0, sigma=.4, n=100)@price CallPrice2<-CRRBinomialTreeOption(TypeFlag="ca",S=20, X=20, Time=1/12, r=.05, b=.05, sigma=.4, n=100)@price CallPrice3<-CRRBinomialTreeOption(TypeFlag="ca",S=2...