Binomial Pricing Model for Options
Hi all! I hope you all had fantastic Holidays and a wonderful New Year. As I mentioned in my previous post, I'm going to try to be better about writing more starting now and moving forward. We'll see how it goes :) The title for this post is a little misleading. I recently read an article in the JoA about how to create a binomial pricing model for options in Excel. I've recently been thinking about how technology can influence the way you solve a particular problem; furthermore, I've been thinking about how uninformed I was (an still am) in regards to technology and you never really know how much you don't know.
In reality, I'm sure quite a few of us feel that we are quite well versed insofar as technology is concerned. I myself felt this way several years ago when I began to learn VBA and Excel. I found that I could do things that many other people could not simply because I could write VBA code. I then found myself turned on my head when I found out about Python (an open source scripting language). I realized that not only was I pretty clueless, but I would have never even realized how clueless I was if I was not introduced to the language in the first place. This turned me on to looking into other technology areas that further enhanced my skills. I am not, however, quite as naive as before and I realize that I still have a *long* way to go before I would consider myself well versed in technology.
You are probably wondering, why am I writing this now? Well, just to let you know that I think you should be learning more and more each and every day. Perhaps try to tackle a new project by using VBA if possible wherever you can. There are several fantastic tutorials about VBA at places like Mr. Excel, Beyond Technology and others. Just do a Google search for VBA tutorials (or something similar) and you'll find a ton of resources. You can always write and ask me if you have help as well. I started off by talking about a binomial pricing model for options in Excel, and I'll conclude by giving you an example of something you can create using VBA once you become fairly proficient. I've tried to document the code although I'm sure there will be questions if you start reading it. Not all of the functionality from the article is included in the model (specifically, it was too time consuming trying to figure out how to include the ability to calculate an early exercise if the option reaches a certain multiple using VBA), but much of the functionality is there. Feel free to try it out and give comments ... click here to get the model.
Again, this is simply in the hopes of inspiring some of you to learn more about technology. Good luck!
Sorry for not writing and Happy New Year!
Hi all! I'm really sorry that I've been such a bad blogger and have not gotten anything up on the site lately. School was breaking my back for a little bit, and looking for a job has been very time consuming as well. Anyway, I just wanted to drop a quick line and say Happy New Year to everyone! I'm going to try to get more posts going over the next month or so, so I can hopefully get back on track. In the mean time, I'm *more* than open to ideas for posts. Have something you want to learn about and you think I might know? Drop me an email and I'll do my best to write something up for you. Or just leave a comment and I'll look there as well. Talk to you soon!
As you are all most likely aware, I'm an open source aficionado and enjoy using technologies like Linux, Python, etc. I read an article today that announced how Google and Sun have teamed up to "Declare War on Microsoft". Forbes doesn't seem to think that this is too much of a threat to Microsoft, but I'll let you be the judge of that one. A little more background may be in order.
Sun Microsystems created the infamous Java programming language that has become widely prevalent today. Google, I'm sure, requires no introduction. What Sun has also built, that you may not be quite aware of, is OpenOffice. This is a suite of office tools similar to Microsoft Office, yet it is open source and therefore FREE. You can typically purchase support from Sun or other consultants on a fee basis, or you can use the online community message boards to try and get your questions answered. I would think, though, that if you don't have any problems with MS Office, you probably won't have any with OO (OpenOffice). Included in the standard distribution are Calc (think: Excel), Writer (think: Word), Impress (think: PowerPoint), and Draw (think: Paint on steroids).
You may be thinking, "But all my historical documents are in MS Office format, I couldn't just give that up!" Fret not, because OO can typically read and write documents that were originally written in the MS Office Suite without a hitch. The only problem that I've run into is scripting in VBA. OO will simply ignore VBA code, as it doesn't (as far as I can tell) know how to interpret it correctly. But I seem to think that very few people will have an issue with this, as most Word documents and Excel spreadsheets go without the added complexity of VBA code. If you have macros that you use in Excel, they will also not work in OO, BUT you can recreate your macros in OO fairly easily.
All in all, I try to use OO whenever possible, although I do have quite a few VBA procedures that I use often that hinder this approach. I would highly recommend you try out OO, and keep an eye out for the Google-Sun combination, as it could prove to be a viable alternative for the more costly, proprietary MS Office. Check it out if you get a chance!