Description Usage Arguments Value Note Author(s) References See Also Examples
View source: R/QuantoAmerPutLSM_AV.R
The function calculates the price of Quanto American put with Least Squares Monte Carlo method with Antithetic Variates (Glasserman, 2004). 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_AV 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_AV
function.
Mikhail A. Beketov
Glasserman, P. 2004. Monte Carlo Methods in Financial Engineering. Springer.
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
,
AmerPutLSM
,
AsianAmerPutLSM
, and
AmerPutLSM_AV
.
1 2 3 4 5 | QuantoAmerPutLSM_AV(n=200, m=50)
put<-QuantoAmerPutLSM_AV(Spot=14.2, Strike=16.5, n=200, m=50)
put
summary(put)
price(put)
|
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