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Function CRRTree

March 22, 2019 0 Comment

Function CRRTree(Spot, K, T, r, sigma, N, OpType As String, ExType As String)
dt = T / N
u = Exp(sigma * (dt ^ 0.5))
d = 1 / u
q = (Exp(r * dt) – d) / (u – d)

Dim S() As Double
ReDim S(N + 1, N + 1) As Double

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For i = 1 To N + 1
For j = i To N + 1
S(i, j) = Spot * u ^ (j – i) * d ^ (i – 1)
Next j
Next i

Dim Op() As Double
ReDim Op(N + 1, N + 1) As Double

For i = 1 To N + 1
Select Case OpType
Case “C”: Op(i, N + 1) = Application.Max(S(i, N + 1) – K, 0)
Case “P”: Op(i, N + 1) = Application.Max(K – S(i, N + 1), 0)
End Select
Next i

For j = N To 1 Step -1
For i = 1 To j
Select Case ExType
Case “A”:
If OpType = “C” Then
Op(i, j) = Application.Max(S(i, j) – K, Exp(-r * dt) * (q * Op(i, j + 1) + (1 – q) * Op(i + 1, j + 1)))
ElseIf OpType = “P” Then
Op(i, j) = Application.Max(K – S(i, j), Exp(-r * dt) * (q * Op(i, j + 1) + (1 – q) * Op(i + 1, j + 1)))
End If
Case “E”:
Op(i, j) = Exp(-r * dt) * (q * Op(i, j + 1) + (1 – q) * Op(i + 1, j + 1))
End Select
Next i
Next j

CRRTree = Op(1, 1)

End Function

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