Algorithm for payoff calculation for option trading strategies using vector terminology

Sinha, Pankaj and Johar, Archit (2009): Algorithm for payoff calculation for option trading strategies using vector terminology.

Abstract

The aim of this paper is to develop an algorithm for calculating and plotting payoff of option strategies for a portfolio of path independent vanilla and exotic options. A general algorithm for calculating the vector matrix for any arbitrary combination strategy is also developed for some of the commonly option trading strategies.

• Item Type: MPRA Paper
• Language: English
• Keywords: option trading strategies, vector
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C63 - Computational Techniques ; Simulation Modeling; C - Mathematical and Quantitative Methods > C8 - Data Collection and Data Estimation Methodology ; Computer Programs > C88 - Other Computer Software; C - Mathematical and Quantitative Methods > C0 - General > C02 - Mathematical Methods; G - Financial Economics > G0 - General > G00 - General

References

[1] Hull, J.C.(2009) Options, Futures, and Other Derivatives ,Prentice Hall.

[2] Natenberg,S.(1994) Option Volatility and Pricing Strategies: Advanced Trading Techniques for Professionals McGraw-Hill Professional Publishing.

[3] Chaput, J. S. and Ederington L. H., “Option Spread and Combination Trading”Journal of Derivatives, 10, 4(Summer 2003):70-88.

[4] http://sourceforge.net/projects/option