Use

The market price calculator for index options calculates current market values, time values, and future market values (the future point in time is the horizon).

Integration / Calculation Basis

In order to value tradable options, you need the transaction data, and either a par coupon or zero coupon yield curve in the transaction currency for the evaluation date.

For valuing index options, you also need the corresponding index prices.

Zero bond discounting factors are needed to discount the cash flow. The zero and par coupon calculation methods can be used to define the zero bond discounting factors. For the par coupon calculation method, the rate valid for the validity term of the option is taken from the par coupon yield curve on the evaluation date.

If the transaction currency differs from the display currency of the option, the transaction currency is changed into the display currency using the currency rate from the horizon. If the horizon is later than the evaluation date, the corresponding forward currency rate (bid or ask price) is calculated for the evaluation date using the yield curves from the transaction and display currencies.

The following procedures are used to calculate the input parameters:

Scope of Functions / Valuation

The values of European options on indices are calculated with the Black-Scholes formula.

This uses the following parameters in the price formula:

Using these input parameters, the option is valued through to the end of its term (exercise date).