py_vollib.ref_python.black_scholes_merton.greeks.analytical
¶
A library for option pricing, implied volatility, and greek calculation. py_vollib is based on lets_be_rational, a Python wrapper for LetsBeRational by Peter Jaeckel as described below.
- copyright:
© 2023 Larry Richards
- license:
MIT, see LICENSE for more details.
py_vollib.ref_python is a pure python version of py_vollib without any dependence on LetsBeRational. It is provided purely as a reference implementation for sanity checking. It is not recommended for industrial use.¶
Module Contents¶
Functions¶
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Returns the Black-Scholes-Merton delta of an option. |
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Returns the Black-Scholes-Merton theta of an option. |
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Returns the Black-Scholes-Merton gamma of an option. |
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Returns the Black-Scholes-Merton vega of an option. |
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Returns the Black-Scholes-Merton rho of an option. |
Attributes¶
- N¶
- delta(flag, S, K, t, r, sigma, q)[source]¶
Returns the Black-Scholes-Merton delta of an option.
- Parameters:
flag (str) – ‘c’ or ‘p’ for call or put.
S (float) – underlying asset price
K (float) – strike price
t (float) – time to expiration in years
r (float) – annual risk-free interest rate
sigma (float) – volatility
q (float) – annualized continuous dividend yield
- Returns:
float
Example 17.1, page 355, Hull:
>>> S = 49 >>> K = 50 >>> r = .05 >>> t = 0.3846 >>> q = 0 >>> sigma = 0.2 >>> flag = 'c' >>> delta_calc = delta(flag, S, K, t, r, sigma, q) >>> # 0.521601633972 >>> delta_text_book = 0.522 >>> abs(delta_calc - delta_text_book) < .01 True
- theta(flag, S, K, t, r, sigma, q)[source]¶
Returns the Black-Scholes-Merton theta of an option.
- Parameters:
flag (str) – ‘c’ or ‘p’ for call or put.
S (float) – underlying asset price
K (float) – strike price
t (float) – time to expiration in years
r (float) – annual risk-free interest rate
sigma (float) – volatility
q (float) – annualized continuous dividend yield
- Returns:
float
The text book analytical formula does not divide by 365, but in practice theta is defined as the change in price for each day change in t, hence we divide by 365.
Example 17.2, page 359, Hull:
>>> S = 49 >>> K = 50 >>> r = .05 >>> t = 0.3846 >>> q = 0 >>> sigma = 0.2 >>> flag = 'c' >>> annual_theta_calc = theta(flag, S, K, t, r, sigma, q) * 365 >>> # -4.30538996455 >>> annual_theta_text_book = -4.31 >>> abs(annual_theta_calc - annual_theta_text_book) < .01 True
Using the same inputs with a put. >>> S = 49 >>> K = 50 >>> r = .05 >>> t = 0.3846 >>> sigma = 0.2 >>> flag = ‘p’ >>> annual_theta_calc = theta(flag, S, K, t, r, sigma, q) * 365 >>> # -1.8530056722 >>> annual_theta_reference = -1.8530056722 >>> abs(annual_theta_calc - annual_theta_reference) < .000001 True
- gamma(flag, S, K, t, r, sigma, q)[source]¶
Returns the Black-Scholes-Merton gamma of an option.
- Parameters:
flag (str) – ‘c’ or ‘p’ for call or put.
S (float) – underlying asset price
K (float) – strike price
t (float) – time to expiration in years
r (float) – annual risk-free interest rate
sigma (float) – volatility
q (float) – annualized continuous dividend yield
- Returns:
float
Example 17.4, page 364, Hull:
>>> S = 49 >>> K = 50 >>> r = .05 >>> t = 0.3846 >>> q = 0 >>> sigma = 0.2 >>> flag = 'c' >>> gamma_calc = gamma(flag, S, K, t, r, sigma, q) >>> # 0.0655453772525 >>> gamma_text_book = 0.066 >>> abs(gamma_calc - gamma_text_book) < .001 True
- vega(flag, S, K, t, r, sigma, q)[source]¶
Returns the Black-Scholes-Merton vega of an option.
- Parameters:
flag (str) – ‘c’ or ‘p’ for call or put.
S (float) – underlying asset price
K (float) – strike price
t (float) – time to expiration in years
r (float) – annual risk-free interest rate
sigma (float) – volatility
q (float) – annualized continuous dividend yield
- Returns:
float
The text book analytical formula does not multiply by .01, but in practice vega is defined as the change in price for each 1 percent change in IV, hence we multiply by 0.01.
Example 17.6, page 367, Hull:
>>> S = 49 >>> K = 50 >>> r = .05 >>> t = 0.3846 >>> q = 0 >>> sigma = 0.2 >>> flag = 'c' >>> vega_calc = vega(flag, S, K, t, r, sigma, q) >>> # 0.121052427542 >>> vega_text_book = 0.121 >>> abs(vega_calc - vega_text_book) < .01 True
- rho(flag, S, K, t, r, sigma, q)[source]¶
Returns the Black-Scholes-Merton rho of an option.
- Parameters:
flag (str) – ‘c’ or ‘p’ for call or put.
S (float) – underlying asset price
K (float) – strike price
t (float) – time to expiration in years
r (float) – annual risk-free interest rate
sigma (float) – volatility
q (float) – annualized continuous dividend yield
- Returns:
float
The text book analytical formula does not multiply by .01, but in practice rho is defined as the change in price for each 1 percent change in r, hence we multiply by 0.01.
Example 17.7, page 368, Hull:
>>> S = 49 >>> K = 50 >>> r = .05 >>> t = 0.3846 >>> q = 0 >>> sigma = 0.2 >>> flag = 'c' >>> rho_calc = rho(flag, S, K, t, r, sigma, q) >>> # 0.089065740988 >>> rho_text_book = 0.0891 >>> abs(rho_calc - rho_text_book) < .0001 True