Conv.option: convert information about options, warrants or convertible...

In R-Finance/PortfolioAttribution: Performance attribution tools used for identifying sources of portfolio return and risk.

Description

The performance of option contracts is measured in esactly the same way as any other asset but they also generate economic exposures. The key to attribution analysis with options is to inclue the appropriate economic exposure for which we can use the option's delta. The option itself will provide part of the valuation. The remaindeer of the option's economic value must be achieved again by using notional assets: option economic exposure = Delta x number of options x strike price = option valuation + notional exposure

Usage

  Conv.option(option)

Arguments

option

nx8 matrix containing option ID (as rownames), and columns corresponding to (in particular order): strike price, number of options, current option price, end option price, option's delta, returns on the underlying

Value

This function returns the equivalent of returns for options, warrants or convertible bonds

Author(s)

Andrii Babii

References

Bacon, C. Practical Portfolio Performance Measurement and Attribution. Wiley. 2004. p. 237-241

See Also

Attribution

Examples

option = matrix(c(1000, 1000, 1000, 300, 400, 10, 20, 30, 40, 50, 10, 11,
12, 13, 14, 12, 13, 14, 15, 16, 0.1, 0.2, 0.3, 0.4, 0.5, 0.1, 0.1, 0.2,
0.2, 0.3), 5, 6)
colnames(option) = c("Strike", "Number", "Current option", "End option",
"delta", "returns")
rownames(option) = c("CVX", "XOM", "GE", "WMT", "FB")
Conv.option(option)

R-Finance/PortfolioAttribution documentation built on May 8, 2019, 4:48 a.m.