A Brief DPL Tutorial

♦ Click on any branch of the “Yr5” node. This will bring up the Get/Pay
menu.
♦ Delete the formula “Yr5” that is there. Click OK
At this point, your model will look like this (Figure 14):
Figure 14
The policy tree will give the result of 15.6892.
American Call Option
We will now value an American
Call Option on the NBI stock, with strike price of 180
and 5 years to expiration.
We will begin by making a copy of the previous file (European Call) which we will
modify for our purposes, basically
by inserting a Decision Node to exercise or not at each
of the 5 time periods. Rename this file “American Call”.
In the Project Manager Pane:
♦ Delete to “Underlying” model and rename the “European
Call” to “American
Call”
♦ Double click on the model to go to the Model Pane
♦ Make this module the “Main” module
In the Influence Diagram Pane:
♦ For convenience, rename the Value Node “ Strike Price” to “X”.
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