R/calculate_option_value.R

In mociepa/ShortfallRiskHedging: Shortfall Risk Hedging for european option

#' @title 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)
#'
#' @param payoffs numeric vector, payoffs of the option from simulations.
#' @param rate numeric value, risk free rate in the model rate >= 0.
#' @param time numeric value, actual time.
#' @param End_Time numeric value, end time of the option, time < End_Time.
#' @return 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)
#' @export

calculate_option_value <- function(payoffs, rate, time = 0, End_Time = 1){
  return( mean(payoffs) * exp( -rate*(End_Time - time) ) )
}