AsianOption {RQuantLib}R Documentation

Asian Option evaluation using Closed-Form solution

Description

The AsianOption function evaluates an Asian-style option on a common stock using an analytic solution for continuous geometric average price. The option value, the common first derivatives ("Greeks") as well as the calling parameters are returned.

Usage

## Default S3 method:
AsianOption(averageType, type, underlying, strike,
        dividendYield, riskFreeRate, maturity, volatility, timeSteps=150, gridPoints=151)
## S3 method for class 'Option':
plot
## S3 method for class 'Option':
print
## S3 method for class 'Option':
summary

Arguments

averageType Specifiy averaging type, either "geometric" or "arithmetic"
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 well-known closed-form solution derived by Black, Scholes and Merton is used for valuation. Implied volatilities are calculated numerically.

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

Value

The AsianOption function returns an object of class AsianOption (which inherits from class Option). 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.

Examples

# simple call with some explicit parameters, and slightly increased vol:
AsianOption("geometric", "put", underlying=80, strike=85, div=-0.03, riskFree=0.05, maturity=0.25, vol=0.2)

[Package RQuantLib version 0.3.2 Index]