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

View source: R/QuantoAmerPutLSM.R

The function calculates the price of Quanto American put with Least Squares Monte Carlo method. The Quanto option is cash-settled option, whose pay-off is converted into a third currency/asset at exercise at a pre-specified rate/price (Wystup, 2011), and can also be considered as a usual option but settled in a "wrong" asset (Vecer, 2011). 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. USD). |

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

`mT` |
Maturity time (years). |

`Spot2` |
Spot price of the 3rd asset (e.g. EUR/USD). |

`sigma2` |
Volatility of the 3rd asset. |

`r2` |
Interest rate of the 3rd asset. |

`dr2` |
Dividend rate of the 3rd asset. |

`rho` |
Correlation coefficient between the prices. |

`x` |
An object returned by the functions |

`object` |
An object returned by the function |

`...` |
Not used. |

The function returns an object of the class QuantoAmerPut 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.

The function `rmvnorm`

included in the pricing algorithm is a part of the mnormt package. Please, load that package before the use of the `QuantoAmerPutLSM`

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.

Vecer, J. 2011. Stochastic Finance: A Numeraire Approach. CRC Press.

Wystup, U. 2011. Quanto Options. MathFinance AG.

Functions: `price`

,
`QuantoAmerPutLSM_AV`

,
`AmerPutLSM`

,
`AsianAmerPutLSM`

, and
`AmerPutLSM_AV`

.

1 2 3 4 5 | ```
QuantoAmerPutLSM(n=200, m=50)
put<-QuantoAmerPutLSM(Spot=14.2, Strike=16.5, n=200, m=50)
put
summary(put)
price(put)
``` |

LSMonteCarlo documentation built on May 29, 2017, 11:08 p.m.

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