In thanhuwe8/fineng: What the Package Does (One Line, Title Case)

knitr::opts_chunk$set(
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fineng

The package provides routines to calculate option prices using different closed-form solutions and Monte-Carlo simulations based on different stochastic motions

Installation

You can install the released version of fineng with

devtools::install_github("fineng")

New Updates on February 2019

Simulation for Contiuous and Discrete Geometric Brownian Motion
Finite-Difference Approximations, Pathwise derivative and Likelihood Ratio method for Option Greeks
Control Variates, Antithetic Variates and Stratified Sampling

Plan for development

We plan to add the following features in the next releases:

Heston Model with Newton-Cotes and Gaussian Quadrature (only Mid-point rule is currently supported)
Simulation of symmetric random walk, scaled random walk and Jump Diffusion Process.
Brownian Bridge
American Option Pricing using Monte Carlo simulation
Rcpp for high-performance computation.

Usage

Geometric Brownian Motion Simulation

``` {R GBM} library(fineng) SinglePath <- SimGBM(100,0.03,0.25,2,100,"discrete") Path100 <- SimDGBM(100,0.03,0.25,2,100,10,"continuous") Path100Terminal <- SimTGBM(100,0.03,0.25,2,100,10,"continuous")

head(SinglePath) knitr::kable(head(Path100,10)) knitr::kable(Path100Terminal)

### Heston model
```{R example}
### Necessary Paramters
PutCall <- "Call"
# Option Properties
S = 100
K = 100
tau = 0.5
r = 0.03
q = 0.02
# Heston model Properties
kappa = 0.2
theta = 0.25
sigma = 0.3
lambda = 0
v0 = 0.02
rho = -0.8
# Mid-point Properties
N = 1000
a = 1e-5
b = 100

### Heston Price using Mid-point integration rule
HestonPriceMP(PutCall, S, K, tau, r, q, kappa, theta, sigma, lambda, v0, rho, N, a, b)

### Comparison with Black-Scholes model

BlackScholes("Call",S = 100, K = 100, tau = 0.5, r = 0.03, q = 0.02, sigma = 0.3)

Citation

Glasserman, Paul. Monte Carlo methods in financial engineering. Vol. 53. Springer Science & Business Media, 2013.
Jäckel, Peter. Monte Carlo methods in finance. J. Wiley, 2002.
Heston, Steven L. "A closed-form solution for options with stochastic volatility with applications to bond and currency options." The review of financial studies 6.2 (1993): 327-343.