DiscountCall(S, X, Cap, Time, r, r_d, sigma, ratio = 1)
DiscountPut(S, X, Cap, Time, r, r_d, sigma, ratio = 1)
Because of the short call component, the discount call is cheaper than a normal call which allows higher returns. On the other hand, the payoff is capped. A discount put is a combination of
Because of the short put, the discount put is cheaper than a normal put which allows higher returns. On the other hand, the payoff is capped. Also known as:
Classification according to the SVSP Swiss Derivative Map 2008: Spread Warrants (115)
GBSOption
, DiscountPut
##
DiscountCall(S=10, X=10, Cap=12, Time=1, r=0.045, r_d=0, sigma=0.2, ratio = 1)
## payoff diagram
S <- seq(0,20, by=0.1)
p <- DiscountCall(S, X=10, Cap=12, Time=1, r=0.045, r_d=0, sigma=0.2, ratio = 1)
p2 <- DiscountCall(S, X=10, Cap=12, Time=0, r=0.045, r_d=0, sigma=0.2, ratio = 1)
plot(S, p, type="l", col="red", , ylim=range(p, p2, na.rm=TRUE),
xlab="underlying price", ylab="payoff", main="Discount Call")
lines(S, p2, col="blue")
abline(v=c(10, 12), lty=2, col="gray80")
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