BlackScholesCallESSim: ES of Black-Scholes call using Monte Carlo Simulation

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

Description

Estimates ES of Black-Scholes call Option using Monte Carlo simulation

Usage

BlackScholesCallESSim(amountInvested, stockPrice, strike, r, mu, sigma,
  maturity, numberTrials, cl, hp)

Arguments

amountInvested	Total amount paid for the Call Option and is positive (negative) if the option position is long (short)
stockPrice	Stock price of underlying stock
strike	Strike price of the option
r	Risk-free rate
mu	Expected rate of return on the underlying asset and is in annualised term
sigma	Volatility of the underlying stock and is in annualised term
maturity	The term to maturity of the option in days
numberTrials	The number of interations in the Monte Carlo simulation exercise
cl	Confidence level for which ES is computed and is scalar
hp	Holding period of the option in days and is scalar

Value

ES

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 call with given parameters.
   BlackScholesCallESSim(0.20, 27.2, 25, .16, .2, .05, 60, 30, .95, 30)

Example output

Loading required package: bootstrap
Loading required package: MASS
Loading required package: forecast
Registered S3 method overwritten by 'quantmod':
  method            from
  as.zoo.data.frame zoo 
[1] 0.004823804

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