kellyEuroBS2: Kelly-fraction for European options under Black-Scholes...

In shill1729/kellyfractions: Optimize log returns

Kelly-fraction for European options under Black-Scholes dynamics

Description

A Kelly-fraction generalization for trading a portfolio consiting of a European option priced under Black-Scholes dynamics with an assumed real-volatility, and a cash-account or bond at the risk-neutral rate. TWo functions are provided in this package, one for computing it specified by the exact values, and one computed via specifying the option via strike, expiry, etc and computing the option value and delta via a pricing method.

Usage

kellyEuroBS2(strike, expiry, mu, volat, rate, spot, type, N = 100, M = 100)

Arguments

strike	strike price of the option
expiry	time to maturity of option in trading years
mu	real drift of the underlying stock price
volat	volatility of the stock price and volatility used for the option pricing
rate	the risk-neutral rate
spot	the underlying spot price
type	type of option, "call" or "put"
N	number of sub-intervals in time-grid
M	number of sub-intervals in space-grid

Value

numeric

shill1729/kellyfractions documentation built on July 16, 2025, 6:21 p.m.