Vanilla Option


Vanilla Option is an abstract type and also direct subtype of Option
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with functions Vanilla Option Functions, direct subtypes Vanilla Option subtypes and keys Vanilla Option keys

TYPE INCLUSION RELATIONSHIPS

Option

Vanilla Option

Base Option

Commodity Option

FX Option

Stock Index Option

Stock Option

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AVAILABLE FUNCTIONS

Create

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AVAILABLE CREATE FUNCTION KEYS

Notional

Pmt Date

Underlying

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This type represents a special type of Option, where the "underlying" is an equity, commodity or currency specified in the key Underlying
The option holder has the right - but not the obligation - to buy (if a "call option") or to sell (if a "put option") in the future a single share of a specified underlying tradable at some preagreed price called "strike".
It is assumed that the strike is paid in units of the currency where the underlying is traded.
In the case where the underlying is itself a currency, the denomination currency of the strike must be explicitly defined.

In mathematical terms, holding such an option on some underlying that exhibits the price S(t) at any time t, is a means of getting non-linear exposure on the underlying price S(t).
In the special case of a European option, letting K be the strike and ε equal 1 if call and -1 if put, the option's payoff at exercise date T will be max(ε(S(T)-K), 0), versus just S(T), were one to hold just the underlying rather than the option.
In American and Bermudan options, the flag in key Pay at Expiry decides whether the strike is paid on the date when the option is exercised or on the payment date associated with the last possible exercise date.
Furthermore, the optional entry Pmt Date can be used to set the payment date associated with the last possible exercise date to any custom date.

The pricing methodology is specified in Model[Vanilla Option]