BarrierOption {RQuantLib}

Barrier Option evaluation using Closed-Form solution

Description

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

Usage

## Default S3 method:
BarrierOption(barrType, type, underlying, strike, 
                                dividendYield, riskFreeRate, maturity, 
                                volatility, barrier, rebate=0.0)

Arguments

barrType

A string with one of the values downin, downout, upin or upout

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

barrier

Option barrier value

rebate

Optional option rebate, defaults to 0.0

Details

A closed-form solution is used to value the Barrier Option. In the case of Barrier options, the calculations are from Haug's "Option pricing formulas" book (McGraw-Hill).

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

Value

An object of class BarrierOption (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

.

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 [e-mail] for the R interface; the QuantLib Group for QuantLib

References

https://www.quantlib.org/ for details on QuantLib.

See Also

AmericanOption,EuropeanOption

Examples

BarrierOption(barrType="downin", type="call", underlying=100,
	strike=100, dividendYield=0.02, riskFreeRate=0.03,
	maturity=0.5, volatility=0.4, barrier=90)