LeveragedBonusCertificate: Leveraged Bonus Certificate valuation using pricing by...

In fCertificates: fCertificates - Basics of Certificates and Structured Products Valuation

Description

values a Leveraged Bonus Certificate using pricing by duplication

Usage

  LeveragedBonusCertificate(S, X, B, B2, Time, r, r_d, 
    sigma, ratio = 1, barrierHit = FALSE)

Arguments

S	the asset price, a numeric value.
X	the exercise price ("Bonuslevel"), a numeric value.
B	the barrier ("Sicherheitslevel"), a numeric value.
B2	knock-out level for the long position (B2 < B)
Time	time to maturity measured in years
r	the annualized rate of interest, a numeric value; e.g. 0.25 means 25% pa.
r_d	the annualized dividend yield, a numeric value; e.g. 0.25 means 25% pa.
sigma	the annualized volatility of the underlying security, a numeric value; e.g. 0.3 means 30% volatility pa.
ratio	ratio, number of underlyings one certificate refers to, a numeric value; e.g. 0.25 means 4 certificates refer to 1 share of the underlying asset
barrierHit	flag whether the barrier has already been reached/hit during the lifetime. Default is FALSE

Details

A Leveraged Bonus Certificate is a combination of

1. a long leveraged position in the stock (aka Turbo Call)

2. a long down-and-out-put with strike price X and barrier B (StandardBarrierOption)

In contrast to normal Bonus Certificates, a Leveraged Bonus Certificates have a second barrier B2 which marks the knock-out level for the long position (turbo call). They are cheaper than conventional Bonus Certificates because of the inherent barrier risk, but allow for higher performances.

Classification according to the SVSP Swiss Derivative Map 2008: Outperformance Bonus Certificates (235)
Classification according to the SVSP Swiss Derivative Map 2010: Outperformance Bonus Certificates (1330)

Value

the price (scalar or vector) of the Leveraged Bonus Certificate

Author(s)

Stefan Wilhelm [e-mail]

References

SVSP Swiss Derivative Map 2008 http://www.svsp-verband.ch/

See Also

StandardBarrierOption in fExoticOptions package.

Examples

##
LeveragedBonusCertificate(S=100, X=120, B=80, B2=70, Time=1, r=0.01, r_d=0, 
  sigma=0.3, ratio=1, barrierHit=FALSE)

## payoff diagram
S <- seq(0, 140)
p <- LeveragedBonusCertificate(S, X=120, B=80, B2=70, Time=1, r=0.01, r_d=0, 
  sigma=0.3, ratio=1, barrierHit=FALSE)
p2 <- LeveragedBonusCertificate(S, X=120, B=80, B2=70, Time=0, r=0.01, r_d=0, 
  sigma=0.3, ratio=1, barrierHit=FALSE)
plot(S, p,  type="l", col="red", , ylim=range(p, p2, na.rm=TRUE), 
  xlab="underlying price", ylab="payoff", main="Leveraged Bonus")
lines(S, p2, col="blue")
abline(v=c(70, 80, 120), lty=2, col="gray80")          

Example output

Loading required package: fBasics
Loading required package: timeDate
Loading required package: timeSeries
Loading required package: fOptions
Loading required package: fExoticOptions
[1] 35.46164

fCertificates documentation built on May 2, 2019, 5:50 p.m.