blslambda (Financial Toolbox)

Black-Scholes elasticity.

Syntax

[lc, lp] = blslambda(so, x, r, t, sig, q)
[lc, lp] = blslambda(so, x, r, t, sig)

Arguments

so: Current stock price.

x: Exercise price.

r: Risk-free interest rate. Enter as a decimal fraction.

t: Time to maturity of the option in years.

sig: Standard deviation of the annualized continuously compounded rate of return of the stock (also known as the volatility).

q: Dividend rate. Enter as a decimal fraction. Default = 0.

Description

[lc, lp] = blslambda(so, x, r, t, sig, q)

returns the elasticity of an option. lc is the call option elasticity or leverage factor, and lp is the put option elasticity or leverage factor. Elasticity (the leverage of an option position) measures the percent change in an option price per one percent change in the underlying stock price.

Note: This function uses normcdf, the normal cumulative distribution function in the Statistics Toolbox.

Example

[lc, lp] = blslambda(50, 50, 0.12, 0.25, 0.3)
lc =
    8.1274
lp =
   -8.6466