Calculator for vanilla options

The methods can be chosen by the user.

For European options the Black-Scholes formula is evaluated, here a choice of method is useless and not active.

For American options the user may choose among the four methods

binomial method (uses a mesh of 512 time instances),
interpolation method,
quadratic approximation,
method of lines (uses three lines and extrapolation).

In many cases the accuracy of the two methods "interpolation" and "quadratic approximation" is poor. The calculator is for testing purposes on the class-room level. In order to provide fast response times we have chosen methods with fixed costs and thus limited accuracy. Note that discrete dividend payment "once" is not yet implemented correctly.

We present as result more digits than are correct! Always 10 digits are printed, but for American options often only a few of the first digits are close to the true value.

Disclaimer:

We do not guarantee any specified quality, accuracy, saftety, or usefulness. Anybody who uses the calculator assumes the entire risk related to the use of the results.

Numerical calculation of option values with analytic or binomial methods

programmed by M.Bonn in 2005, in the Cologne research group.