BinaryOption {RQuantLib}R Documentation

Binary Option evaluation using Closed-Form solution

Description

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

Usage

BinaryOption.default(type, underlying, strike, dividendYield, riskFreeRate,
maturity, volatility, cashPayoff)

## 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
cashPayoff Payout amount

Details

A closed-form solution is used to value the Binary 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 BinaryOption (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

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

AmericanOption,EuropeanOption

Examples

BinaryOption("call", 100, 100, 0.02, 0.03, 0.5, 0.4, 10)

[Package RQuantLib version 0.1.12 Index]