/*
** Version 01
** Date : 20/07/2001                                        
** --------------------------------------------------------------------------
** Copyright K.Cuthbertson and D. Nitzsche
** "Financial Engineering:Derivatives and Risk Manangement" - J. Wiley 2001
**
**   FOREIGN CURRENCY OPTIONS 
**
**   Pricing foreign currency options using the Garman-Kohlhagen formula.    
**   (Model based on the Black - Scholes formula) 
**
*/

new ;  cls ;

/*
ofile = "c:\\kcdn\\output.out" ;
output file = ^ofile reset ;
*/

format /m1/rdn 16,8 ; output off ; screen off ;

" ------------------------------------------------------------ " ;
"                                                              " ; 
"            Definitions of Variables Used                     " ;
"            -----------------------------                     " ;
"                                                              " ;
"                                                              " ;
"   K =           Strike price (cents per f.c.)                " ;   
"                                                              " ; 
"   S =           exchange rate (scalar - single value only)   " ; 
"                 (required for printing)                      " ; 
"                                                              " ; 
"   Days_mat =    Days until expiry of option                  " ;
"                 (Default : 50)                               " ; 
"                                                              " ; 
"   Days_year =   Number of days in the year                   " ; 
"                 (Default : 365)                              " ; 
"                                                              " ;  
"   r_dom =       Domestic interest rates (US Dollars)         " ; 
"                 (Default : 0.1 - 10%)                        " ;
"                                                              " ; 
"   r_for =       foreign interest rate                        " ; 
"                 (Default : 0.08 - 8%)                        " ; 
"                                                              " ; 
"   sigma =       Volatility of exchange rate                  " ; 
"                 (Default : 0.2 - 20%)                        " ; 
"                                                              " ; 
" ------------------------------------------------------------ " ;

/* ----------------------------------- START USER DATA INPUT ---------------------------- 
                  Note : the currency and the strike price has to be defined as
                      US Dollars (or cents) per unit of foreign currency     
   -------------------------------------------------------------------------------------- */


K = 145 ;      @ e.g. Here defined in cents per Pound Sterling @ 
S = 142 ;       

Days_mat  = 50 ; 
Days_year = 365 ; 

r_dom     = 0.05 ;              @ US Dollar interest rates @ 
r_for     = 0.09 ;              @ interest rates of the foreign currency @ 
sigma     = 0.15 ;              @ Volatility of the exchange rate @ 

/* ---------------------------------------- END USER DATA INPUT ---------------------------- */

/* ----------------------------------- STARTING THE CALCULATION ---------------------------- */

T = Days_mat/Days_year ; 

   {GK_call} = gkcall(K,S,sigma,T,r_dom,r_for);

    GK_put = -S.*exp(-r_for.*T) + GK_call + K.*exp(-r_dom.*T) ;   @ Using Put Call parity @ 

    SBE_call = K + GK_call ; 
    SBE_put  = K - GK_put ;  

/* ------------------------------ Printing Output and the Graph -------------------------- */

output on; screen on ; 

@@ "" ;
" ------------------------------------------------------------------------ " ;
"                                                                          " ; 
"   FILE : Chp11 Tab4 Pricing currency options.txt                         " ;
"   ==============================================                         " ;
"                                                                          " ; 
" Version  20/07/2001                                                      " ; 
"                                                                          " ; 
" Copyright K.Cuthbertson and D. Nitzsche                                  " ; 
" 'Financial Engineering:Derivatives and Risk Manangement' - J. Wiley 2001 " ; 
"                                                                          " ; 
"  FOREIGN CURRENCY OPTIONS                                                " ; 
"  Pricing foreign currency options                                        " ;
"                                                                          " ;
" ------------------------------------------------------------------------ " ;
@@ "" ; 

@@ "" ; 
@@ " Parameter Inputs  " ; 
@@ " ================  " ; 
@@ "" ; 
@@ ftos(K,"    Strike Price of Option : %*.*lf",25,2) ;
@@ "" ; 
@@ ftos(Days_mat,"    Number of days untill maturity : %*.*lf",17,2) ;
@@ ftos(Days_year,"    Number of days in the year : %*.*lf",21,2) ;
@@ ftos(T,"    Time to expiry : %*.*lf",35,4) ;
@@ "" ; 
@@ ftos(r_dom,"    Domestic interest rates (e.g. US rates) : %*.*lf",8,2) ;
@@ ftos(r_for,"    Foreign interest rates : %*.*lf",25,2) ;
@@ ftos(sigma,"    Volatility of exchange rate : %*.*lf",20,2) ;
@@ "" ; 
@@ "" ; 
@@ " OPTION PREMIA  " ; 
@@ " =============  " ; 
@@ "" ; 
@@ ftos(GK_call,"    CALL PREMIUM Garman Kohlhagen model : %*.*lf",14,4) ;
@@ ftos(GK_put,"    PUT PREMIUM Garman Kohlhagen model : %*.*lf",15,4) ;
@@ "" ; 
@@ ftos(SBE_call,"    Break even stock price for the Call : %*.*lf",14,4) ;
@@ ftos(SBE_put,"    Break even stock price for the Put : %*.*lf",15,4) ;
@@ "" ; 
@@ "" ; 

/* ---------------------------------------- END OF PROGRAM -------------------------------- */


/* ---------------------------------------------------------------------------------------- */
/*                              Procedures:  Garman Kolhagen Call and Put                   */
/* ---------------------------------------------------------------------------------------- */
proc gkcall(k,s,sigma,tau,r_dom,r_for);
  local d1,d2,c;
  d1 = (ln(s./k)+(r_dom-r_for+(sigma.^2)/2).*T)./(sigma.*sqrt(T)) ; 
  d2 = d1 - (sigma.*sqrt(T)) ; 
  c = s.*exp(-(r_for.*T)).*cdfn(d1)-k.*exp(-(r_dom.*T)).*cdfn(d2) ; 
  retp(c);
endp;


end ;