matrix_eta: Hedging of the option

In mociepa/ShortfallRiskHedging: Shortfall Risk Hedging for european option

Hedging of the option

Description

The matrix_eta function calculate amount of money needed to hedge an option claim.

Usage

matrix_eta(option_matrix, Xi_matrix, ds, dt, I, rate)

Arguments

option_matrix	numeric matrix, value of the option.
Xi_matrix	numeric matrix, number of asset needed to hedge an option.
ds	numeric value, step size of the asset price.
dt	numeric value, step size of the time.
I	numeric value, number of steps in the stock price.
rate	numeric value, risk free rate in the model rate >= 0.

Value

A numeric matrix, amount of money needed to hedge an option claim using finite difference algorithms.

Examples

ds <- finding_parameters(100, 0.3, 600, 5)[1]
dt <- finding_parameters(100, 0.3, 600, 5)[2]
option <- finite_difference_explicit(ds, dt, 600, 0, 0.3, 1, call_payoff, 100)
Xi <- delta_finite_difference(option, ds)
matrix_eta(option, Xi, ds, dt, 600, 0)

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