calculate_option_value: Calculate option values

In mociepa/ShortfallRiskHedging: Shortfall Risk Hedging for european option

Calculate option values

Description

The calculate_option_value function calculate option value using Monte Carlo simulations.

Usage

calculate_option_value(payoffs, rate, time = 0, End_Time = 1)

Arguments

payoffs	numeric vector, payoffs of the option from simulations.
rate	numeric value, risk free rate in the model rate >= 0.
time	numeric value, actual time.
End_Time	numeric value, end time of the option, time < End_Time.

Value

A numeric value, estimated value of the option.

Examples

X <- generate_scenarios(100, 0, 0.3)
payoff <- calculate_payoffs(X, call_payoff, strike = 100)
calculate_option_value(payoff, 0)

payoff <- calculate_payoffs(X, put_payoff, strike = 100)
calculate_option_value(payoff, 0)

## Example with asian call payoff
asian_call <- function(asset_price, strike){
  return(mean(asset_price) - min( mean(asset_price), strike ))
  }
payoff <- calculate_payoffs(paths = X, option_modificate_payoff, const = 110, drift = 0.05, rate = 0, vol = 0.3, p = 1, asian_call, strike = 105)
calculate_option_value(payoff, 0)

mociepa/ShortfallRiskHedging documentation built on Sept. 30, 2022, 6:43 p.m.