%% Compute Cash-or-Nothing Option Prices Using the Black-Scholes Option Pricing Model
% Consider a European call and put cash-or-nothing options on a futures contract with and exercise strike price of $90, a fixed payoff of $10 that expires on October 1, 2008. Assume that on January 1, 2008, the contract trades at $110, and has a volatility of 25% per annum and the risk-free rate is 4.5% per annum. Using this data, calculate the price of the call and put cash-or-nothing options on the futures contract. First, create the RateSpec:

Settle = 'Jan-1-2008';
Maturity = 'Oct-1-2008';
Rates = 0.045;
Compounding = -1;  
Basis = 1;
RateSpec = intenvset('ValuationDate', Settle, 'StartDates', Settle,...
'EndDates', Maturity, 'Rates', Rates, 'Compounding', Compounding, 'Basis', Basis)

%
% Define the StockSpec.

AssetPrice = 110;
Sigma = .25;
DivType = 'Continuous';
DivAmount = Rates;
StockSpec = stockspec(Sigma, AssetPrice, DivType, DivAmount)

%
% Define the call and put options.

OptSpec = {'call'; 'put'};
Strike = 90;
Payoff = 10;

%
% Calculate the prices.

Pcon = cashbybls(RateSpec, StockSpec, Settle,...
Maturity, OptSpec, Strike, Payoff)

% Copyright 2015 The MathWorks, Inc.