Function File: [CallEl, PutEl] = blslambda (Price, Strike, Rate, Time, Volatility)

Function File: [CallEl, PutEl] = blslambda (Price, Strike, Rate, Time, Volatility, Yield)

Computes elasticity of option under the Black-Scholes model.

• Variable: Price The current price of the underlying asset.
• Variable: Strike The strike price the option is written on.
• Variable: Rate The risk-free interest rate.
• Variable: Time The time-to-expiry.
• Variable: Volatility The volatility of the underlying asset.
• Variable: Yield (Optional, default = 0) Annualized, continuously compounded rate of dividends of the underlying asset.

Computes the elasticity of an option under the Black-Scholes model. Elasticity measures the percent change in the option price per percent change in the underlying asset price.

Update: the following bug has been fixed in MATLAB R2014a(5.3): There is a bug in the MATLAB version of blslambda in which the deltas of the option are not discounted by Yield in the nonzero dividend case. That is, they compute normcdf(d1) * S / V when they should compute exp(-Yield*T) * normcdf(d1) * S / V. At the time of writing, this bug is present in the financial toolbox shipped with R2013a. Both this version of blslambda and that shipped with R2013a agree when there are no dividends.

See also: blsdelta, blsgamma, blsprice, blsrho, blstheta, blsvega.

Package: financial