Forward Start Option

Forward start options
alpha a: 0.95 (example)
a < 1 ---> call (put) will start 1-a percent ITM(OTM)
a = 1 ---> call (put) will start ATM
a > 1 ---> call (put) will start a-1 percent OTM(ITM)


Below a table with call and put prices for given parameters.

  • Input Parameters
  • Call or Put option
  • S - underlying Spotrate
  • Alpha - alpha
  • t1 - time to forward start
  • T - time to maturity in fraction of a year
  • r - risk free interest rate
  • b - cost of carry
  • v - volatility
  • Parameter Values
  • Call/Put option
  • 100
  • 0.95
  • 0.058
  • 0.05
  • 0.01
  • 0.04
  • 0.30
  • Call/Put Prices
  • Call:11.6376
  • Put : 4.8720