RQuantLib (version 0.2.2)

BarrierOption: 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

BarrierOption.default(barrType, type, underlying, strike, dividendYield,
                      riskFreeRate, maturity, volatility,
		      barrier, rebate=0.0)
## S3 method for class 'Option':
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## S3 method for class 'Option':
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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

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
• 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.

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.

References

http://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)