# ChooserLT: Chooser option valuation via Lattice Tree (LT) Model In QFRM: Pricing of Vanilla and Exotic Option Contracts

## Description

Calculates the price of a Chooser option using a recombining binomial tree model. Has pricing capabilities for both simple European Chooser options as well as American Chooser Options, where exercise can occur any time as a call or put options.

## Usage

 ```1 2``` ```ChooserLT(o = OptPx(Opt("Chooser", ttm = 1)), t1 = 0.5, t2 = 0.5, IncBT = FALSE) ```

## Arguments

 `o` The `OptPx` option object to price. `t1` The time to maturity of the call option, measured in years. `t2` The time to maturity of the put option, measured in years. `IncBT` `TRUE/FALSE` Choice of including the lattice tree simulation in the output. Input `FALSE` yields faster computation and fewer calculated results to store in memory.

## Details

The American chooser option is interpreted as exercise of option being available at any point in time during the life of the option.

## Value

An original `OptPx` object with `PxLT` field as the price of the option and user-supplied `ttc`, `IncBT` parameters attached.

## Author(s)

Richard Huang, Department of Statistics, Rice University, spring 2015

## References

Hull, J.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
Thomas S.Y. Ho et al., The Oxford Guide to Financial Modeling : Applications for Capital Markets. . .

## Examples

 ``` 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18``` ```(o = ChooserLT())\$PxLT #Default Chooser option price. (See Ho pg 234 in references) o = Opt('Eu', S0=100, ttm=1, K=100) o = OptPx(o, r=0.10, q=0, vol=0.1, NSteps=5) (o = ChooserLT(o, t1 = .5, t2 =.5, IncBT=TRUE))\$PxLT #American Chooser, higher price than European equivalent o = Opt('Am', S0=100, ttm=1, K=100) o = OptPx(o, r=0.10, q=0, vol=0.1, NSteps=5) ChooserLT(o,t1=.5, t2=.5,IncBT=FALSE)\$PxLT o = Opt('Eu', S0=50, ttm=1, K=50) o = OptPx(o, r=0.05, q=0.02, vol=0.25, NSteps=5) ChooserLT(o, t1 = .75, t2 = .75, IncBT=FALSE)\$PxLT o = Opt('Eu', S0=50, ttm=1, K=50) o = OptPx(o, r=0.05, q=0.5, vol=0.25, NSteps=5) ChooserLT(o, t1 = .75, t2 = .75, IncBT=FALSE)\$PxLT ```

### Example output

```[1] 21.031
[1] 76.46568
[1] 76.46568
[1] 18.27972
[1] 18.27972
```

QFRM documentation built on May 29, 2017, 10:12 p.m.