AmericanPutESBinomial: Estimates ES of American vanilla put using binomial tree.

In Dowd: Functions Ported from 'MMR2' Toolbox Offered in Kevin Dowd's Book Measuring Market Risk

Description

Estimates ES of American Put Option using binomial tree to price the option and historical method to compute the VaR.

Usage

AmericanPutESBinomial(amountInvested, stockPrice, strike, r, volatility,
  maturity, numberSteps, cl, hp)

Arguments

amountInvested	Total amount paid for the Put Option.
stockPrice	Stock price of underlying stock.
strike	Strike price of the option.
r	Risk-free rate.
volatility	Volatility of the underlying stock.
maturity	Time to maturity of the option in days.
numberSteps	The number of time-steps considered for the binomial model.
cl	Confidence level for which VaR is computed.
hp	Holding period of the option in days.

Value

ES of the American Put Option

Author(s)

Dinesh Acharya

References

Dowd, Kevin. Measuring Market Risk, Wiley, 2007.

Lyuu, Yuh-Dauh. Financial Engineering & Computation: Principles, Mathematics, Algorithms, Cambridge University Press, 2002.

Examples

# Market Risk of American Put with given parameters.
   AmericanPutESBinomial(0.20, 27.2, 25, .16, .05, 60, 20, .95, 30)

Dowd documentation built on May 2, 2019, 6:15 p.m.