hestonSLVForwardOptionPricer: Vanilla Forward Starting Option Pricer for the Heston SLV...

In klausspanderen/RHestonSLV: R Implementation of the Heston Stochastic Local Volatility Model

Description

The hestonSLVForwardOptionPricer function evaluates a forward starting vanilla european option under the Heston Stochastic Volatility model using Monte-Carlo simulations. The option value and the implied Black-Scholes-Merton volatility are returned.

Usage

  hestonSLVForwardOptionPricer(referenceDate, strike, resetDate, optionType, maturityDate,
                               nSimulations, hestonProcess, leverageFunction)

Arguments

referenceDate	a date setting the reference date for the calculation
strike	the relative strike of the option. The absolute strike is spot value at reset date times the relative strike
resetDate	the reset date at which the absolute strike is fixed
optionType	a string with one of the values “call” or “put”
maturityDate	the maturity date
nSimulation	number of Monte-Carlo simulations used to calculate the option value
hestonProcess	the Heston model part of the HestonSLV specification
leverageFunction	the leverage function of the HestonSLV model

Value

The hestonSLVForwardOptionPricer function returns a list with the following components:

value	Value of option
impliedVol	implied Black-Scholes-Merton volatility of the option

Examples

process <- HestonProcess(function(t,s) {0.05}, function(t,s) {0.02},
                         100, 0.09, 1.0, 0.06, 0.4, -0.75)

leverageFct <- function(t, s) { exp(-t)*(s+70)/100.0 }

s <- seq(0.7, 1.5, 0.1)
plot(s, sapply(s, function(strike) {
  hestonSLVForwardOptionPricer(Sys.Date(), strike, Sys.Date()+182, "call", Sys.Date()+365,
                               4000, process, leverageFct)$impliedVol
                }), type="b",lty=2, ylab="Implied Volatility",xlab="Strike"
)

klausspanderen/RHestonSLV documentation built on Oct. 4, 2021, 11:10 a.m.