AsianAmerPutLSM: Calculating the price of Asian American put

In LSMonteCarlo: American options pricing with Least Squares Monte Carlo method

Description

The function calculates the price of Asian American put with Least Squares Monte Carlo method (pay-off based on arithmetic mean). The regression model included in the algorithm is quadratic polynomial (Longstaff & Schwartz, 2000).

Usage

AsianAmerPutLSM(Spot = 1, sigma = 0.2, n = 1000, m = 365, Strike = 1.1, r = 0.06, 
dr = 0, mT = 1)

## S3 method for class 'AsianAmerPut'
print(x, ...)
## S3 method for class 'AsianAmerPut'
summary(object, ...)

Arguments

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 AsianAmerPutLSM.
object	An object returned by the function AsianAmerPutLSM.
...	Not used.

Value

The function returns an object of the class AsianAmerPut 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.

Author(s)

Mikhail A. Beketov

References

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.

See Also

Functions: price, AmerPutLSM, AmerPutLSM_CV, AmerPutLSM_AV, and QuantoAmerPutLSM.

Examples

AsianAmerPutLSM(n=500, m=100)
put<-AsianAmerPutLSM(Spot=14.2, Strike=16.5, n=500, m=50)
put
summary(put)
price(put)
put$price

Example output

Loading required package: mvtnorm
Loading required package: fBasics
Loading required package: timeDate
Loading required package: timeSeries
Asian American Put Option
Price: 0.1127311Asian American Put Option
Price: 2.438994
Asian American Put Option
(Pay-off with arithmetic mean)
Method: Simple Least Squares Monte Carlo
                             
Option price         2.438994
Spot price           14.2    
Strike               16.5    
Volatility           0.2     
Number of paths      500     
Number of time-steps 50      
Interest rate        0.06    
Dividend rate        0       
Maturity time        1       
[1] 2.438994
[1] 2.438994

LSMonteCarlo documentation built on May 2, 2019, 8:55 a.m.