The Compound function calculates the theoretical price, sensitivities, the implied volatility, and the implied strike value of a European compound option using Rubinstein’s model. See Multiple Exercise Options for a further explanation.
Compound 
(OptionType, ModelStatistic, Asset, StrikeOption, StrikeUnderly, TimeOption, TimeExpire, Volatility, InterestRate, YieldRate, MarketPrice, TimeFormat, InterestType, YieldType) 
Note: Optional arguments are shown in Italics. MarketPrice is not Optional for the Implied Calculations.
Argument 
Description 
OptionType 
Alphanumeric value indicating the type of option: •Call_Call = 1 or "cc" (call option on a call option) •Call_Put = 2 or "cp" (call option on a put option) •Put_Call = 3 or "pc" (put option on a put option) •Put_Put = 4 or "pp" (put option on a put option) 
ModelStatistic 
Numeric value indicating the type of function required for the return value: •Theoretical = 1 •Delta = 2 •Gamma = 3 •Theta = 4 •ImpliedVol = 5 •Vega = 6 •Rho = 7 •Psi = 8 •Lambda = 9 •UnderlyStrikeSensativity = 58 •UnderlyImpliedStrike = 59 •OptionStrikeSensativity = 60 •OptionImpliedStrike = 61 
Asset 
The price of the underlying asset. Must be > 0. 
StrikeOption 
The price at which the compound option can be purchased if the option is a call or sold if the option is a put. Must be > 0. 
StrikeUnderly 
The price at which the underlying asset can be purchased if the option is a call or sold if the option is a put. Must be > 0. 
TimeOption 
The time, expressed in either Days or Years (depending on the TimeFormat value), until the expiration of the compound option. Must be: 0 < TimeOption < TimeExpire. 
TimeExpire 
Time, expressed in either Days or Years (depending on the TimeFormat value), until the expiration underlying option. Must be > 0. 
Volatility 
Annualized volatility of the underlying security. Must be > 0. 
InterestRate 
Riskfree interest rate expressed as a percentage. This rate is interpreted as a continuously compounded rate unless otherwise specified in the InterestType argument. Must be > 0. 
YieldRate 
Yield, expressed as a percentage (dividends or interest yield), of the underlying asset price. This rate is interpreted as a continuously compounded rate unless specified otherwise in the YieldType argument. 
MarketPrice 
Optional. The selling price of the option in the marketplace. This input is required when implied volatility and strike are calculated. Price must be > 0. 
TimeFormat 
Optional. Alphanumeric value indicating the format of the time arguments (i.e. TimeExpire). If omitted, Days are used as the default. Specified as either: •Days = 0 or "D" (case insensitive) •Years = 1 or "Y" (case insensitive) 
InterestType 
Optional. Alphanumeric value indicating the type of InterestRate to use when evaluating the option. This value is converted to Continuously Compounded for the calculations. If omitted, a Continuously Compounded rate is used. 
YieldType 
Optional. Alphanumeric value indicating the type of YieldRate to use when evaluating the option. This value is converted to Continuously Compounded for the calculations. If omitted, a Continuously Compounded rate is used. 
Example
Calculate all of functions for a compound call on call option whose asset price 0.5 years from the compound option expiration date, 1 year from the underlying expiration option is $56. The exercise price of the compound call is $5, the exercise price of the underlying call is $40, the riskfree interest rate is 7% per annum, the yield rate is 4.5% per annum, and the annual volatility is 25%. All of the rates are considered continuous. So, 
Input 

Output 

Variable 
Value 

Function 
Name 
Value 
OptionType 
1 (Call on Call) 

1 
Theoretical: 
11.908645 
Asset 
56 

2 
Delta: 
0.872395 
StrikeOption 
5 

3 
Gamma: 
0.013484 
StrikeUnderly 
40 

4 
Theta: 
0.004683 
TimeOption 
0.5 

5 
Implied Vol.: 
0.261459 
TimeExpire 
1 

6 
Vega: 
0.076747 
Volatility 
25% 

7 
Rho: 
0.347082 
InterestRate 
7% 

8 
Psi: 
0.488541 
YieldRate 
4.5% 

9 
Lambda: 
4.102409 
MarketPrice 
12 

58 
StrikeSensUnderly: 
0.811772 
TimeFormat 
Years 

59 
ImpliedStrikeUnderly: 
39.887633 



60 
StrikeSensOption: 
0.894921 



61 
ImpliedStrikeOption: 
4.898062 