Error: Not enough input arguments. from (n1 = normcdf(d1.*CP);)

    function ab = debug
    clear; clc;
    N = 30000; % number of simulations
    NC = 2; % number of options
    T = 1/252; % Intial Time
    S0=100; % Initial Stock Price
    X = [1.2 0.8]*100;  %Call and Put Options
    M = [30 30]/252; %Time to maturity
    H =[4 -1];     %Portfolio Weights
    sigma = 0.0032;
    r     = 0.01;
    mu    = 0.2;
    q     = 0.0;

    H0 = bs(S0, X, r, q, sigma, M) * H(1); % initial portfolio value S0=1  
    HP = bs(X, r, q, sigma, M) * H(2); % initial portfolio value S0=1 
    % errs = randn(N,1); % normal errors
    errs = trnd(3,N,1)/sqrt(3); % t-distributed errors
    ST =S0* exp(mu*T + sigma*sqrt(T)*errs); % final asset price
    %ST= S0*exp(( mu-sigma^2/2)*T + sigma*sqrt(T)*errs);
    C  = zeros(N,NC);
    P  = zeros(N,NC);
    for i=1:NC;
        C(:,i) = bs(X(i)./ST,r,sigma,M(i)-T); % final put option values
        P(:,i) = bs(X(i)./ST,r,sigma,M(i)-T); % final put option values
    end
    sims = C*H(1) + P*H(2);

    VaR_S10=S0*sigma*norminv(0.1); %Stock Value at Risk
    VaR_S5=S0*sigma*norminv(0.05);
    VaR_S1=S0*sigma*norminv(0.01);
    %H = bs(X, r, sigma, M) .* H / H0; % H is now portfolio _weights_
    % Portfolio Delta for Call
    H0Delta = bsdelta(X, r, sigma, M) * H(1); % initial portfolio delta
    mP = H0 + H0 * mu * H0Delta * T;
    sP = sqrt( H0.^2 * sigma.^2 * H0Delta.^2 * T);
    DVaR10_c = mP + norminv(0.1) * sP;
    DVaR5_c = mP + norminv(0.05) * sP;
    DVaR1_c = mP + norminv(0.01) * sP;
    %D_ES = mean(sims) > DVaR10;

    %Portfolio Delta for Put
    HPDelta = bsdelta(X, r, sigma, M) * H(2)'; % initial portfolio delta
    mP = HP + HP * mu * H0Delta * T;
    sP = sqrt( HP.^2 * sigma.^2 * HPDelta.^2 * T);
    DVaR10_p = mP + norminv(0.1) * sP;
    DVaR5_p = mP + norminv(0.05) * sP;
    DVaR1_p = mP + norminv(0.01) * sP;
    %D_ES = mean(sims) > DVaR10;
    %
    %PORTFOLIO DELTA
    P_DVaR10=DVaR10_c + DVaR10_p;
    P_DVaR5=DVaR5_c + DVaR5_p;
    P_DVaR1=DVaR1_c + DVaR1_p;

    % Portfolio delta-gamma Call
    H0Gamma = bsgamma(X, r, sigma, M) * H(1); % initial portfolio gamma
    mPG = mP + .5 * H0.^2 * sigma.^2 * H0Gamma *T;
    sPG = sqrt( sP.^2 + .75 * H0.^4 * sigma.^4 * H0Gamma.^2 * T.^2 );
    DGVaR10_c =mPG + norminv(0.1)*sPG;
    DGVaR5_c = mPG + norminv(0.05)*sPG;
    DGVaR1_c = mPG + norminv(0.01)*sPG;
    %DG_ES = mean(sims) > DGVaR10;

    %
    % Portfolio delta-gamma Put
    HPGamma = bsgamma(X, r, sigma, M) * H(2); % initial portfolio gamma
    mPG = mP + .5 * HP.^2 * sigma.^2 * HPGamma *T;
    sPG = sqrt( sP.^2 + .75 * HP.^4 * sigma.^4 * HPGamma.^2 * T.^2 );
    DGVaR10_p =mPG + norminv(0.1)*sPG;
    DGVaR5_p = mPG + norminv(0.05)*sPG;
    DGVaR1_p = mPG + norminv(0.01)*sPG;
    %DG_ES = mean(sims) > DGVaR10;

    %PORTFOLIO DELTA-GAMMA
    P_DGVaR10 = DGVaR10_c + DGVaR10_p;
    P_DGVaR5 = DGVaR5_c + DGVaR5_p;
    P_DGVaR1 = DGVaR1_c + DGVaR1_p;

    % disp('   initial MC10%VaR   MC5%VaR   MC1%VaR')
    % disp([H0, SimVaR10, SimVaR5, SimVaR1])
    disp('   initial D10%VaR   D5%VaR    D1%VaR')
    disp([H0, DVaR10, DVaR5, DVaR1])
    disp('   initial DG10%VaR  DG5%VaR   DG1%VaR')
    disp([H0, DGVaR10, DGVaR5, DGVaR1])
    subplot(2,1,1);
    normplot(sims); % normal distribution plot
    %b = mP-3*sP:6*sP/100:mP+3*sP;
    subplot(2,1,2);
    hist(sims,100);

    figure (2)
    plot(sims);
    xlabel('sample paths')
    ylabel('ST')

    % BLACK-SCHOLES FORMULA FOR CALL
    function y = bs(S0, x, r, q, sig, t, CP)
    % The simple Black-Scholes European call option Price
    d1 = ( log(S0./x) + ( r-q + .5*sig.^2 ) .*t ) ./ sig ./sqrt(t);
    d2 = d1 - sig.*sqrt(t);
    n1 = normcdf(d1.*CP);
    n2 = normcdf(d2.*CP);
    y = CP.*(S0.*exp(-q.*t).*n1 - x.*exp(-r.*t).*n2); 
    %if(flag == -1)
     %y = -y;
    %   elseif (flag == -1)
    %    y=x.*n2.*exp(-q.*t)-n1; %Put Option Price 
     %end

Answer 1

[Walter Roberson]

Your lines

    H0 = bs(S0, X, r, q, sigma, M) * H(1); % initial portfolio value S0=1  
    HP = bs(X, r, q, sigma, M) * H(2); % initial portfolio value S0=1

call bs with first 6 and then 5 input arguments. But you have

      function y = bs(S0, x, r, q, sig, t, CP)

so your function expects 7 input arguments. As soon as the function tries to use the value of the CP parameter you are going to have an error because you did not pass in enough parameters.