CompoundLT {QFRM} | R Documentation |
Compound option valuation via lattice tree (LT) model
Description
CompoundLT
prices a compound option using the binomial tree (BT) method.
The inputs it takes are two OptPx
objects.
It pulls the S from the o2 input which should be the option with the greater time to maturity.
Usage
CompoundLT(o1 = OptPx(Opt(Style = "Compound")), o2 = OptPx(Opt(Style =
"Compound")))
Arguments
o1 |
The |
o2 |
The |
Value
User-supplied o1
option with fields o2
and PxLT
,
as the second option and calculated price, respectively.
Author(s)
Kiryl Novikau, Department of Statistics, Rice University, Spring 2015
References
Hull, John C., Options, Futures and Other Derivatives, 9ed, 2014. Prentice Hall. ISBN 978-0-13-345631-8, http://www-2.rotman.utoronto.ca/~hull/ofod/index.html.
Examples
(o = CompoundLT())$PxLT # Uses default arguments
#Put option on a Call:
o = Opt(Style="Compound", S0=50, ttm=.5, Right="P", K = 50)
o1 = OptPx(o, r = .1, vol = .4, NSteps = 5)
o = Opt(Style="Compound", S0=50, ttm=.75, Right="C", K = 60)
o2 = OptPx(o, r = .1, vol = .4, NSteps = 5)
(o = CompoundLT(o1, o2))$PxLT
#Call option on a Call:
o = Opt(Style = "Compound", S0 = 50, ttm= .5, Right = "Call", K = 50)
o1 = OptPx(o, r = .1, vol = .4, NSteps = 5)
o = Opt(Style = "Compound", S0 = 50, ttm= .75, Right = "Call", K = 5)
o2 = OptPx(o, r = .1, vol = .4, NSteps = 5)
(o = CompoundLT(o1, o2))$PxLT
#Put option on a Put:
o = Opt(Style = "Compound", S0 = 50, ttm= .5, Right = "Put", K = 40)
o1 = OptPx(o, r = .1, vol = .4, NSteps = 5)
o = Opt(Style = "Compound", S0 = 50, ttm= .75, Right = "Put", K = 50)
o2 = OptPx(o, r = .1, vol = .4, NSteps = 5)
(o = CompoundLT(o1, o2))$PxMC
#Call option on a Put:
o = Opt(Style = "Compound", S0 = 50, ttm= .5, Right = "Call", K = 30)
o1 = OptPx(o, r = .1, vol = .4, NSteps = 5)
o = Opt(Style = "Compound", S0 = 50, ttm= .75, Right = "Put", K = 80)
o2 = OptPx(o, r = .1, vol = .4, NSteps = 5)
(o = CompoundLT(o1, o2))$PxLT
[Package QFRM version 1.0.1 Index]