Inputs

Model (Black-Scholes, Whaley, Binomial) – There are three widely used mathematical models for option pricing: Black-Scholes (European), Whaley (Quadratic), Binomial.

Model (Barrier) – There are four different types of barrier models: Down & Out, Down & In, Up & Out, and Up & In. Standard represents Black-Scholes model.

Model (Spread) – There are models pricing two different exotic spread options: European style and American style.

Model (CEV) – There are three types of models for option pricing: Black-Scholes, CEV on Stocks, and CEV on Futures.

Model (Gram-Charlier) – There are two types of models: Black-Scholes and Gram-Charlier.

Model (Jump-Diffusion) – There are two types of models: Black-Scholes and Jump-Diffusion.

Stock Price – The price of the underlying asset.

Exercise Price – The price at which the asset can be purchased if a call or sold if a put.

Value Date – The date used in determining the value of an option that fluctuates in price.

Early-Exercise Date – The first date when an option could be early-exercised.

Expiration Date – The date when an option expires.

Volatility (%) – The annualized volatility of the underlying asset price.

Interest Rate (%) – The risk-free interest rate expressed as a percentage.

Dividend Method – There are two dividend methods: discrete and continuous.

Yield Rate (%) – The yield expressed as a percentage from the underlying asset.

Dividend Amount – The amount of the next dividend payment on an absolute, rather than percentage, basis.

Dividend Frequency – The time period between ex-dividend dates.

Ex-Dividend Date – The first date following the declaration of a dividend on which the buyer of a stock is not entitled to receive the next dividend payment.

Repo Rate (%) – The discount rate at which a central bank repurchases government securities from the commercial banks, depending on the level of money supply it decides to maintain in the country’s monetary system.

Rho – The coefficient of elasticity; 1=Black-Scholes, 0=Absolute Process, others=Square Root Process.

Start Date – The start date of the option.

Exercise Ratio – The date used in determining the value of an option that fluctuates in price.

Skewness – Skewness of the return rates (Skewness = 0 for the normal distribution).

Kurtois – Kurtosis of the return rates (Kurtosis = 0 for the normal distribution).

JumpSize – The fraction of the total volatility due to the jump.

NumJumps – The number of jumps per year.

Vesting Date – The date on which options vest.

Lattice Type – There are two types of lattices: Binomial lattice and Trinomial lattice.

Suboptimal Exercise Factor – The Suboptimal Exercise Factor (SOEF) accounts for early-exercise of the option contract. A SOEF of 2 assumes that exercise will occur when the share price reaches 2 times the exercise price.

Exit Rate Pre-Vesting (%) – The turnover or forfeiture rate prior to vesting. No payoff is assumed for an in-the-money option.

Exit Rate Post-Vesting (%) – The turnover or forfeiture rate post vesting. A payoff is assumed for an in-the-money option.

End Date – The last date of the analysis, e.g., future date.

Start Price – The price on the Start Date.

Lower Target – The Lower Target for the Stock Price.

Upper Target – The Upper Target for the Stock Price.

Stat Model – The statistical interpretation: 0 = Stratonovich, 1 = Ito.

Boundary Price – The price at which the option is knocked out or knocked in.

Rebate Amount – The amount that is rebated back to the option holder in the event of a knockout.

Underlying Price 1 – The current price of the underlying asset 1.

Underlying Price 2 – The current price of the underlying asset 2.

Volatility 1 (%) – The annualized volatility of the underlying asset 1.

Volatility 2 (%) – The annualized volatility of the underlying asset 2.

Correlation (%) – The correlation between underlying price 1 and underlying price 2.

Yield Rate 1 (%) – The yield expressed as a percentage from the underlying asset 1.

Yield Rate 2 (%) – The yield expressed as a percentage from the underlying asset 2.

Outputs

Theoretical Value – The value of an option evaluated according to a financial mathematical model.

Delta – The rate of change in an option’s price with respect to a given change in the price of the underlying asset or instrument.

Delta 100’s – The delta of an option expressed in 100s.

Lambda (%) – The percentage change in an option’s price with respect to a given percentage change in the underlying price.

Gamma – The rate of change in an option’s delta with respect to a given change in the price of the underlying assets or instrument.

Gamma (1%) – The rate of change in an option’s delta with respect to a given change in the price of the underlying assets or instrument.

Theta – The rate of change in an option’s price as time (1 day) passes with all else remaining the same.

Theta (7 days) – The rate of change in an option’s price as time (7 day) passes with all else remaining the same.

Vega – The rate of change in an option’s price with respect to the 1% change in interest rate.

Rho – The rate of change in an option’s price with respect to the 1% change in the volatility.

Psi – The rate of change in an option’s price with respect to the 1% change in continuous dividend yield.

Strike Sensitivity – Also called dual delta. The rate of change in an option’s price with respect to a given change in the strike price of the underlying asset or instrument.

Intrinsic Value – The in-the-money portion of the option’s premium.

Time Value – The premium a rational investor would pay over its current exercise value (intrinsic value), based on its potential to increase in value before expiring.

Zero Volatility – At zero volatility, the options value is equal to the minimum value.

Market Option Price – The traded price of the option in the market for calculating Implied Volatility.

Implied Volatility (%) – The volatility of the price of the underlying asset or instrument that is implied by the market price of the option based on an option pricing model.

Fair Value – The theoretical value of an option.

Expected Time – The average time (in years) to payoff using the lattice method.

Implied Expected Term – The implied expected life in years. It may be an input to the Black-Scholes model as the time to expiration.

Expected Term Date – The date equals Value Date plus Implied Expected Life.

Frequency of Monitoring – The time interval (in years) between two consecutive monitoring events with the stock prices monitored on a regular basis.

Continously – Corresponds to entering the numeric value 0.

Hourly – Corresponds to entering the numeric value 0.0006.

Daily – Corresponds to entering the numeric value 0.004.

Weekly – Corresponds to entering the numeric value 0.192.

Implied Strike – The strike price that would result in the observed market option price.