option_convex_payoff: Calculate payoff from modificate european option

In mociepa/ShortfallRiskHedging: Shortfall Risk Hedging for european option

Calculate payoff from modificate european option

Description

The option_convex_payoff function is used to calculate payoff of modified european option.

Usage

option_convex_payoff(const, asset_price, drift, rate, vol, p, FUN, ...)

Arguments

const	numeric value, parameter of the modified payoff.
asset_price	numeric vector, the price of the asset over the life of the option.
drift	numeric value, drift of the model.
rate	numeric value, risk free rate in the model rate >= 0.
vol	numeric value, volatility of the model, vol > 0.
p	numeric value, power of the loss function, p > 1.
FUN	the function to be applied, payoff option: see 'Details' and 'Examples'.
...	arguments to FUN.

Details

FUN have to had parameter asset_price which represent price oft the asset over the life of the option, see call_payoff

Arguments in ... cannot have the same name as any of the other arguments, and care may be needed to avoid errors.

Value

A numeric value, payoff of the modified european option using convex loss function.

Examples

option_convex_payoff(5.110, c(121.1, 120, 125.4), 0.1, 0.05, 0.3, 3, call_payoff, strike = 105)
option_convex_payoff(1.410, c(141.1, 150, 135.4), 0.1, 0.05, 0.3, 3, put_payoff, strike = 150)
## Example with asian call payoff
asian_call <- function(asset_price, strike){
  return(mean(asset_price) - min( mean(asset_price), strike ))
  }
option_convex_payoff(1.1, c(121.1, 120, 125.4), 0.1, 0.05, 0.3, 3, asian_call, strike = 105)
 

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