Black Scholes Option Pricing

The code shows simple implementation of blackscholes algorithm.

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type Style = Call | Put
  
let cnd x =
   let pow x n = exp (n * log(x) ) 
   let a1 =  0.31938153
   let a2 = -0.356563782
   let a3 =  1.781477937
   let a4 = -1.821255978
   let a5 =  1.330274429
   let pi = 4.0 * atan 1.0
   let l  = abs(x)
   let k  = 1.0 / (1.0 + 0.2316419 * l)
   let w  = ref (1.0-1.0/sqrt(2.0*pi)*exp(-l*l/2.0)*(a1*k+a2*k*k+a3*(pow k 3.0)+a4*(pow k 4.0)+a5*(pow k 5.0)))
   if (x < 0.0) then  w := 1.0 - !w
   !w
 
// call_put_flag: 'c' if call option; otherwise put option
// s: stock price
// x: strike price of option
// t: time to expiration in years
// r: risk free interest rate
// v: volatility
let black_scholes style s x t r v =
        let d1=(log(s / x) + (r+v*v/2.0)*t)/(v*sqrt(t))
        let d2=d1-v*sqrt(t)
        let res = ref 0.0
        match style with
         | Call -> res := s*cnd(d1)-x*exp(-r*t)*cnd(d2)
         | Put -> res := x*exp(-r*t)*cnd(-d2)-s*cnd(-d1)
        !res
 
 
// Example usage::
// black_scholes Call 60.0 65.0 0.25 0.08 0.3;;

union case Style.Call: Style

union case Style.Put: Style

val cnd : x:float -> float

Full name: Script.cnd

val x : float

val pow : (float -> float -> float)

val n : float

val exp : value:'T -> 'T (requires member Exp)

Full name: Microsoft.FSharp.Core.Operators.exp

val log : value:'T -> 'T (requires member Log)

Full name: Microsoft.FSharp.Core.Operators.log

val a1 : float

val a2 : float

val a3 : float

val a4 : float

val a5 : float

val pi : float

val atan : value:'T -> 'T (requires member Atan)

Full name: Microsoft.FSharp.Core.Operators.atan

val l : float

val abs : value:'T -> 'T (requires member Abs)

Full name: Microsoft.FSharp.Core.Operators.abs

val k : float

val w : float ref

Multiple items
val ref : value:'T -> 'T ref

Full name: Microsoft.FSharp.Core.Operators.ref

--------------------
type 'T ref = Ref<'T>

Full name: Microsoft.FSharp.Core.ref<_>

val sqrt : value:'T -> 'U (requires member Sqrt)

Full name: Microsoft.FSharp.Core.Operators.sqrt

val black_scholes : style:Style -> s:float -> x:float -> t:float -> r:float -> v:float -> float

Full name: Script.black_scholes

val style : Style

val s : float

val t : float

val r : float

val v : float

val d1 : float

val d2 : float

val res : float ref

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More information

Link:	http://fssnip.net/3I
Posted:	13 years ago
Author:	Kishor Aher
Tags:	finance