4. Portfolios and Hedging


4.1 Calculation of Arbitrage


1151 arbitrage ()
calculates an arbitrage table

The function 1154 arbitrage calculates an arbitrage table considering puts and calls with the same strike price. It is simply started by typing

  arbitrage()
in the command line of XploRe. After starting arbitrage the following window will appear:

1163

Here you are asked to put in your given data -- Days to maturity, Interest rate, Stock price, Lowest basis price, Highest basis price and the Number of steps.

After pushing the OK button you can first put in the call prices and right afterwards the put prices:


1167

1171

As a result XploRe presents you the following table of arbitrage in the output window, where

  [ 1,] Stock price:     587.30
  [ 2,] Interest rate:     0.0302
  [ 3,] Days to maturity: 17.00
  [ 4,]  
  [ 5,] Call_price Put_price Basis  Stock_flow Call_flow Put_flow  Bank_flow  Arbitrage 
  [ 6,] --------------------------------------------------------------------------------
  [ 7,]      3.00    15.90   575.00    587.30    -3.00    15.90   -574.18     26.02
  [ 8,]      3.00    15.90   600.00    587.30    -3.00    15.90   -599.15      1.05
  [ 9,]      3.00    15.90   625.00    587.30    -3.00    15.90   -624.11    -23.91
  [10,]


4.2 Bull-Call Spreads


1184 callbull ()
calculates the results of a Bull-Call Spread for the context of option pricing

The function 1187 callbull calculates the results of a Bull-Call Spread for the context of option pricing. It is simply started by typing

  callbull()
in the command line of XploRe. After starting callbull() the following window will appear:

1196

After putting in all the basic data required just push the OK button. XploRe will calculate the results and present them in the XploRe output window in the following way:

  [ 1,]  
  [ 2,]   Stock price    long Call   short Call    gain/loss
  [ 3,] ----------------------------------------------------
  [ 4,]        540.00     -3500.00      1500.00     -2000.00
  [ 5,]        550.00     -3500.00      1500.00     -2000.00
  [ 6,]        560.00     -2500.00      1500.00     -1000.00
  [ 7,]        570.00     -1500.00      1500.00         0.00
  [ 8,]        580.00      -500.00      1500.00      1000.00
  [ 9,]        590.00       500.00      1500.00      2000.00
  [10,]        600.00      1500.00      1500.00      3000.00
  [11,]



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