BinaryMC: Binary option valuation via Monte-Carlo (via) simulation.

In QFRM: Pricing of Vanilla and Exotic Option Contracts

Description

Binary option valuation via Monte-Carlo (via) simulation.

Usage

BinaryMC(o = OptPx(Opt(Style = "Binary")), Q = 25,
  Type = c("cash-or-nothing", "asset-or-nothing"), NPaths = 5)

Arguments

o	An OptPx object
Q	A fixed numeric amount of payoff
Type	Binary option type: 'cash-or-nothing' or 'asset-or-nothing'.
NPaths	The number of simulation paths to use in calculating the price Partial names are allowed, eg. 'c' or 'a'

Details

Two types of binary options are priced: 'cash-or-nothing' and 'asset-or-nothing'.

Value

The original input object o with added parameters and option price PxMC

Author(s)

Tongyue Luo, Rice University, Spring 2015.

References

Hull, John C., Options, Futures and Other Derivatives, 9ed, 2014. Prentice Hall. ISBN 978-0-13-345631-8, http://www-2.rotman.utoronto.ca/~hull/ofod/index.html. pp.606-607.

Examples

(o = BinaryMC())$PxMC

o = OptPx(Opt(Style="Binary"))
(o = BinaryMC(o, Type="cash"))$PxMC

o = OptPx(Opt(Style="Binary"),q=0.01)
(o = BinaryMC(o, Type="asset"))$PxMC

o = OptPx(Opt(Style="Binary", S0=100, K=80),q=0.01)
(o = BinaryMC(o, Type="cash"))$PxMC

o = OptPx(Opt(Style="Binary", Right="Put", S0=50, K=60),q=0.04)
(o = BinaryMC(o, Type="asset"))$PxMC

Example output

[1] 18.09675
[1] 13.57256
[1] 13.12053
[1] 18.09675
[1] 15.58668

QFRM documentation built on May 2, 2019, 8:26 a.m.