Multi-Asset Option Payoff Calculator

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Description

payoff calculates the per-unit option payoff for digital, best-of, and worst-of multi-asset options.

Usage

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payoff(payType, pcFlag, strike, S)

Arguments

payType

case; if 0, digital payoff, if 1, best-of payoff, if 2, worst-of payoff.

pcFlag

case vector; if 0, call, if 1, put.

strike

vector; option strikes.

S

list containing the vectors of spatial grid points associated with each underlying. Vector sizes of underlying spatial grid points need not be equal.

Value

payoff returns an array of the unit option values at each point spanned by the list of underlying vectors. Dimension of array is inhereted from S.

Author(s)

Michael Eichenberger and Carlo Rosa

Examples

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# payoff of a dual-asset digital call with strikes at 100 and 90.
S <- list(seq(0, 500, by=1), seq(0, 500, by=1))
payoff(0, c(0, 0), c(100, 90), S)