BarrierOption: Barrier Option evaluation using Closed-Form solution

In RQuantLib: R interface to the QuantLib library

Description

This function evaluations an Barrier option on a common stock using a closed-form solution. The option value as well as the common first derivatives ("Greeks") are returned.

Usage

## Default S3 method:
BarrierOption(barrType, type, underlying, strike, 
                                dividendYield, riskFreeRate, maturity, 
                                volatility, barrier, rebate=0.0)

Arguments

barrType	A string with one of the values downin, downout, upin or upout
type	A string with one of the values call or put
underlying	Current price of the underlying stock
strike	Strike price of the option
dividendYield	Continuous dividend yield (as a fraction) of the stock
riskFreeRate	Risk-free rate
maturity	Time to maturity (in fractional years)
volatility	Volatility of the underlying stock
barrier	Option barrier value
rebate	Optional option rebate, defaults to 0.0

Details

A closed-form solution is used to value the Barrier Option. In the case of Barrier options, the calculations are from Haug's "Option pricing formulas" book (McGraw-Hill).

Please see any decent Finance textbook for background reading, and the QuantLib documentation for details on the QuantLib implementation.

Value

An object of class BarrierOption (which inherits from class Option) is returned. It contains a list with the following components:

value	Value of option
delta	Sensitivity of the option value for a change in the underlying
gamma	Sensitivity of the option delta for a change in the underlying
vega	Sensitivity of the option value for a change in the underlying's volatility
theta	Sensitivity of the option value for a change in t, the remaining time to maturity
rho	Sensitivity of the option value for a change in the risk-free interest rate
dividendRho	Sensitivity of the option value for a change in the dividend yield
parameters	List with parameters with which object was created

.

Note that under the new pricing framework used in QuantLib, binary pricers do not provide analytics for 'Greeks'. This is expected to be addressed in future releases of QuantLib.

Note

The interface might change in future release as QuantLib stabilises its own API.

Author(s)

Dirk Eddelbuettel [e-mail] for the R interface; the QuantLib Group for QuantLib

References

http://quantlib.org for details on QuantLib.

See Also

AmericanOption,EuropeanOption

Examples

BarrierOption(barrType="downin", type="call", underlying=100,
	strike=100, dividendYield=0.02, riskFreeRate=0.03,
	maturity=0.5, volatility=0.4, barrier=90)

Example output

sh: 1: cannot create /dev/null: Permission denied
Concise summary of valuation for BarrierOption 
 value  delta  gamma   vega  theta    rho divRho 
3.7383     NA     NA     NA     NA     NA     NA 

RQuantLib documentation built on May 2, 2019, 4:48 p.m.