Bachelier-style approximation of the value of an at-the-money claim on
the event factor: \(\approx |\Delta\eta|\, q(1-q)\sqrt{A/(2\pi)}\),
where \(\Delta\eta\) is the gap between the outcome-conditional mean
multipliers of the underlying (the event exposure).
Usage
ec_atm_event_call(q, A, deta)
Arguments
- q
Numeric vector of current event probabilities in \((0,1)\).
- A
Numeric vector of event-clock time (non-negative).
- deta
Numeric, the event exposure \(\Delta\eta = \eta_1 -
\eta_2\).
Value
Numeric vector (same units as the underlying's return).
Examples
ec_atm_event_call(q = 0.195, A = 0.166, deta = -0.012)
#> [1] 0.0003061793
