Option price not NPV()d ?

[Ken Anderson-2]

The VanillaOption class has a method, NPV(), which calculates the net  
present value for the option (the value of the option multiplied by  
the discounting factor).

I'm using these classes to compute exchange traded commodity options,  
and therefore, should not have the price NPV()d.  Is there a way to  
get the value without NPV ?

Ken

[Ferdinando M. Ametrano-3]

Hi Ken

I might be missing something here... why shouldn't the payoff of a
commodity option be discounted?

ciao -- Nando

On 4/27/06, Ken Anderson <[hidden email]> wrote:

> The VanillaOption class has a method, NPV(), which calculates the net
> present value for the option (the value of the option multiplied by
> the discounting factor).
>
> I'm using these classes to compute exchange traded commodity options,
> and therefore, should not have the price NPV()d.  Is there a way to
> get the value without NPV ?
>
> Ken
>
>
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[Ken Anderson-2]

Because exchange options are effectively settled every day by margin  
through the exchange, so it's always present day money.

In the commodity world, it's pretty typical to mix OTC options and  
exchange options.  You need to discount the OTC options, but not the  
exchange options.

Ken

On Apr 27, 2006, at 2:40 PM, Ferdinando Ametrano wrote:

> Hi Ken
>
> I might be missing something here... why shouldn't the payoff of a
> commodity option be discounted?
>
> ciao -- Nando
>
> On 4/27/06, Ken Anderson <[hidden email]> wrote:
>> The VanillaOption class has a method, NPV(), which calculates the net
>> present value for the option (the value of the option multiplied by
>> the discounting factor).
>>
>> I'm using these classes to compute exchange traded commodity options,
>> and therefore, should not have the price NPV()d.  Is there a way to
>> get the value without NPV ?
>>
>> Ken
>>
>>
>> -------------------------------------------------------
>> Using Tomcat but need to do more? Need to support web services,  
>> security?
>> Get stuff done quickly with pre-integrated technology to make your  
>> job easier
>> Download IBM WebSphere Application Server v.1.0.1 based on Apache  
>> Geronimo
>> http://sel.as-us.falkag.net/sel?
>> cmd=lnk&kid=120709&bid=263057&dat=121642
>> _______________________________________________
>> Quantlib-users mailing list
>> [hidden email]
>> https://lists.sourceforge.net/lists/listinfo/quantlib-users
>>

[Luigi Ballabio]

On 04/27/2006 08:01:28 PM, Ken Anderson wrote:
> The VanillaOption class has a method, NPV(), which calculates the net  
> present value for the option (the value of the option multiplied by  
> the discounting factor).
>
> I'm using these classes to compute exchange traded commodity options,  
> and therefore, should not have the price NPV()d.  Is there a way to  
> get the value without NPV ?

Not at this time. If you have to mix such options with other  
instruments, you could inherit from VanillaOption and redefine the  
calculate() method in your derived class as

void calculate() const {
     VanillaOption::calculate();
     // find the discount factor
     NPV_ /= discount;
}

Luigi



----------------------------------------

Can't act.  Slightly bald.  Also dances.
-- RKO executive, reacting to Fred Astaire's screen test.
    Cerf/Navasky, "The Experts Speak"

[Ken Anderson-2]

Thanks Luigi - that will work great!

Ken

On May 5, 2006, at 11:25 AM, Luigi Ballabio wrote:

>
> On 04/27/2006 08:01:28 PM, Ken Anderson wrote:
>> The VanillaOption class has a method, NPV(), which calculates the  
>> net present value for the option (the value of the option  
>> multiplied by the discounting factor).
>> I'm using these classes to compute exchange traded commodity  
>> options, and therefore, should not have the price NPV()d.  Is  
>> there a way to get the value without NPV ?
>
> Not at this time. If you have to mix such options with other  
> instruments, you could inherit from VanillaOption and redefine the  
> calculate() method in your derived class as
>
> void calculate() const {
>     VanillaOption::calculate();
>     // find the discount factor
>     NPV_ /= discount;
> }
>
> Luigi
>
>
>
> ----------------------------------------
>
> Can't act.  Slightly bald.  Also dances.
> -- RKO executive, reacting to Fred Astaire's screen test.
>    Cerf/Navasky, "The Experts Speak"