Option Price Calculator 

Use

The option price calculator calculates premiums on standard and exotic currency options and premiums for OTC options.

For the exact calculations, see the following sections of the documentation for the MRM price calculator:

Option Price Calculator:

- European Standard Options (OTC)

- European Barrier Options (OTC)

- American Standard Options (OTC)

Integration

For more information about the option price calculator, see Foreign Exchange/Derivatives in the Treasury section of the SAP Library.

Scope of functions

You make the following entries to calculate the premium on a currency option:

In the Market data section, you can make the following entries (or, alternatively, import the data from the market data table by choosing Edit ® Get market data):

Enter the exchange rate for the currency pair you specified in the Currency pair field. This rate is used to calculate the option premium.

In this field, you enter the forward premiums/discounts. Alternatively, you can let the system calculate them on the basis of the interest rates for the currencies in the currency pair. In this case, you leave the Swap field empty, enter the interest rates for the first and second currencies, and choose Calculate ® Swap/forward rates.

This field shows the sum of spot and swap rates as the forward exchange rate - both bid and ask sides.

Enter the bid and ask values of the interest rate corresponding to the option period for the currency named first in the currency pair. If this interest rate is not consistent with the specified swap rate and the interest rate of the second currency, it is calculated and adjusted.

Enter the bid and ask values of the interest rate corresponding to the option period for the currency named second in the currency pair. If you do not enter a value in this field, the interest rate is calculated using the swap and interest rates for the first currency.

Enter both bid and ask values of the volatility corresponding to the option period, as a volatility.

In the Premiums section, enter the basis prices of the options for which you want to calculate the premiums. By choosing Calculate ® Calculate premiums you can display the currency option premiums as bid and ask quotes.

You can also calculate the sensitivities of a premium. To calculate the sensitivities of one premium, select the premium and choose Calculate ® Implied volatility. To calculate the sensitivities of all the premiums, choose Edit ® List of results.

You can calculate the premiums for European exotic currency options by choosing Goto ® Exotic options. You then need to specify the following values in the Premiums section: