AmericanOption {RQuantLib}R Documentation

American Option evaluation using Finite Differences

Description

This function evaluations an American-style option on a common stock using finite differences. The option value as well as the common first derivatives ("Greeks") are returned.

Usage

AmericanOption.default(type, underlying, strike, dividendYield, riskFreeRate,
maturity, volatility, timeSteps=150, gridPoints=151)

## S3 method for class 'Option':
print
## S3 method for class 'Option':
summary

Arguments

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
timeSteps Time steps for the Finite Differences method, default value is 150
gridPoints Grid points for the Finite Differences method, default value is 151

Details

The Finite Differences method is used to value the American Option.

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

Value

An object of class AmericanOption (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 edd@debian.org for the R interface; the QuantLib Group for QuantLib

References

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

See Also

EuropeanOption

Examples

# simple call with unnamed parameters
AmericanOption("call", 100, 100, 0.02, 0.03, 0.5, 0.4)
# simple call with some explicit parameters
AmericanOption("put", strike=100, volatility=0.4, 100, 0.02, 0.03, 0.5)

[Package RQuantLib version 0.1.12 Index]