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BlackScholesVanna

  

compute the Vanna of a European-style option with given payoff

 

Calling Sequence

Parameters

Description

Examples

References

Compatibility

Calling Sequence

BlackScholesVanna(S0, K, T, sigma, r, d, optiontype)

BlackScholesVanna(S0, P, T, sigma, r, d)

Parameters

S0

-

algebraic expression; initial (current) value of the underlying asset

K

-

algebraic expression; strike price

T

-

algebraic expression; time to maturity

sigma

-

algebraic expression; volatility

r

-

algebraic expression; continuously compounded risk-free rate

d

-

algebraic expression; continuously compounded dividend yield

P

-

operator or procedure; payoff function

optiontype

-

call or put; option type

Description

• 

The Vanna of an option or a portfolio of options measures Delta's sensitivity to volatility.

Vanna=σΔ

Vanna=2σS0S

• 

The BlackScholesVanna command computes the Vanna of a European-style option with the specified payoff function.

• 

The parameter S0 is the initial (current) value of the underlying asset. The parameter T is the time to maturity in years.

• 

The parameter K specifies the strike price if this is a vanilla put or call option. Any payoff function can be specified using the second calling sequence. In this case the parameter P must be given in the form of an operator, which accepts one parameter (spot price at maturity) and returns the corresponding payoff.

• 

The sigma, r, and d parameters are the volatility, the risk-free rate, and the dividend yield of the underlying asset. These parameters can be given in either the algebraic form or the operator form. The parameter d is optional. By default, the dividend yield is taken to be 0.

Examples

withFinance:

The Delta of an option measures the sensitivity of the option to price changes in the underlying asset, S0. The Vanna of an option measures Delta's sensitivity to volatility, sigma. The following example illustrates the characteristics of the Vanna of an option with respect to these two variables.

In this example, the Vanna is defined as a function of the underlying asset price S0, and volatility, sigma.  For a European call option, we will assume that the strike price is 100, time to maturity is 1, and the risk-free interest rate of 0.05.  We also assume that this option does not pay any dividends.

VannaBlackScholesVannaS0,100,1,σ,0.05,0,'call':

plot3dVanna,σ=0..0.5,S0=0..200,'labels'=Volatility,Spot Price,Value,'colorscheme'=zgradient,Black,White,Red,'thickness'=0

We can also see how the Vanna behaves as a function of the risk-free interest rate, the dividend yield, and volatility.  To compute the Vanna of a European call option with strike price 100 maturing in 1 year, we take:

BlackScholesVanna100,100,1,σ,r,d,'call'

2ⅇσ4+4dσ2+4rσ2+4d28dr+4r28σ2σ2+2d2r4σ2π

(1)

This can be numerically solved for specific values of the risk-free rate, the dividend yield, and the volatility.

BlackScholesVanna100,100,1,0.3,0.05,0.03,'call'

0.105047298

(2)

It is also possible to use the generic method in which the option is defined through its payoff function:

BlackScholesVanna100,t→maxt100,0,1,σ,r,d

ⅇrσ2+2d2r28σ22σ2+2d2r4σ2π

(3)

BlackScholesVanna100,t→maxt100,0,1,0.3,0.05,0.03

0.1050473823

(4)

VannaBlackScholesVanna100,100,1,σ,r,0.03,'call'

Vanna0.09678793857ⅇ0.0000499999999750.σ2+100.r3.2σ2σ40.3755372014ⅇ0.0000499999999750.σ2+100.r3.2σ2σ20.387151754ⅇ0.0000499999999750.σ2+100.r3.2σ2σ2r+0.0003484365784ⅇ0.0000499999999750.σ2+100.r3.2σ20.02322910523ⅇ0.0000499999999750.σ2+100.r3.2σ2r+0.3871517538ⅇ0.0000499999999750.σ2+100.r3.2σ2r20.0003590480521ⅇ1.0.5000000002rσ2+0.1249999999σ4+0.01499999999σ2+0.00044999999980.02999999998r+0.4999999997r2σ2+0.02393653681ⅇ1.0.5000000002rσ2+0.1249999999σ4+0.01499999999σ2+0.00044999999980.02999999998r+0.4999999997r2σ2r0.3989422801ⅇ1.0.5000000002rσ2+0.1249999999σ4+0.01499999999σ2+0.00044999999980.02999999998r+0.4999999997r2σ2r2+0.09973557ⅇ1.0.5000000002rσ2+0.1249999999σ4+0.01499999999σ2+0.00044999999980.02999999998r+0.4999999997r2σ2σ4+0.3989422803ⅇ1.0.5000000002rσ2+0.1249999999σ4+0.01499999999σ2+0.00044999999980.02999999998r+0.4999999997r2σ2σ2σ4

(5)

plot3dVanna,σ=0..1,r=0..1

Here are similar examples for the European put option:

BlackScholesVanna100,120,1,0.3,0.05,0.03,'put'

0.826177365

(6)

BlackScholesVanna100,t→max120t,0,1,0.3,0.05,0.03,0

0.8261766714

(7)

References

  

Hull, J., Options, Futures, and Other Derivatives, 5th. edition. Upper Saddle River, New Jersey: Prentice Hall, 2003.

Compatibility

• 

The Finance[BlackScholesVanna] command was introduced in Maple 2015.

• 

For more information on Maple 2015 changes, see Updates in Maple 2015.

See Also

Finance[BlackScholesCharm]

Finance[BlackScholesDelta]

Finance[BlackScholesGamma]

Finance[BlackScholesPrice]

Finance[BlackScholesVera]

Finance[BlackScholesVeta]

Finance[BlackScholesVomma]

Finance[EuropeanOption]

Finance[ImpliedVolatility]

Finance[LatticePrice]