Description Usage Arguments Value Author(s) References See Also Examples

The function calculates the price of plain vanilla American put with Least Squares Monte Carlo method. The regression model included in the algorithm is quadratic polynomial (Longstaff & Schwartz, 2000).

1 2 3 4 5 6 7 |

`Spot` |
Spot price of the underlying asset (e.g. stock). |

`sigma` |
Volatility of the underlying asset. |

`n` |
Number of paths simulated. |

`m` |
Number of time steps in the simulation. |

`Strike` |
Strike price of the option. |

`r` |
Interest rate of the numeraire currency (e.g. EUR). |

`dr` |
Dividend rate of the underlying asset. |

`mT` |
Maturity time (years). |

`x` |
An object returned by the functions |

`object` |
An object returned by the function |

`...` |
Not used. |

The function returns an object of the class AmerPut that is a list comprising the price calculated, option type, and the entry parameters. Class-specific `print`

function gives the option type information and the price. The price as a single number can be derived using the `price`

function. An overview of the entire object can be seen using the `summary`

function.

Mikhail A. Beketov

Longstaff, F.A., and E.S. Schwartz. 2000. Valuing american option by simulation: A simple least-squared approach. The Review of Financial Studies. 14:113-147.

Functions: `price`

,
`AmerPutLSM_AV`

,
`AmerPutLSM_CV`

,
`AsianAmerPutLSM`

, and
`QuantoAmerPutLSM`

.

1 2 3 4 5 6 | ```
AmerPutLSM()
put<-AmerPutLSM(Spot=14.2, Strike=16.5, n=500, m=100)
put
summary(put)
price(put)
put$price
``` |

```
Loading required package: mvtnorm
Loading required package: fBasics
Loading required package: timeDate
Loading required package: timeSeries
Rmetrics Package fBasics
Analysing Markets and calculating Basic Statistics
Copyright (C) 2005-2014 Rmetrics Association Zurich
Educational Software for Financial Engineering and Computational Science
Rmetrics is free software and comes with ABSOLUTELY NO WARRANTY.
https://www.rmetrics.org --- Mail to: info@rmetrics.org
American Put Option
Price: 0.1173262American Put Option
Price: 2.307947
American Put Option
Method: Simple Least Squares Monte Carlo
Option price 2.307947
Spot price 14.2
Strike 16.5
Volatility 0.2
Number of paths 500
Number of time-steps 100
Interest rate 0.06
Dividend rate 0
Maturity time 1
[1] 2.307947
[1] 2.307947
```

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