armaOptions (version 1.0.1)

CallOptionsOverTime: Time Sensitivity Analysis for European Call Option

Description

This function calculates the value of the a European call option for a list of future time values, given stock price data and a given buy value.

Usage

CallOptionsOverTime(
  stock_data,
  future_times,
  buy_value,
  max.p = 5,
  max.q = 5,
  method = "CSS-ML"
)

Value

Estimated values of a European call option at different future times

Arguments

stock_data

Numeric vector of stock prices data.

future_times

Numeric vector of the future times

buy_value

Numeric value representing the buy value

max.p

The maximum order of the autoregressive part of the ARMA model (default is 5).

max.q

The maximum order of the moving average part of the ARMA model (default is 5).

method

The way that the ARMA model is calculated, accepted values are "ML", "CSS-ML" and "CSS"

Examples

library(stats)
library(forecast)

# Create simulated data
n = 100
set.seed(42)
arma_values = arima.sim(n = n, model = list(ar = c(0.6), ma = c(0.5, -0.5)))
linear_model = 5 + 1:n
stock_data = arma_values + linear_model

future_times = c(1,3,5)
buy_value = 105


CallOptionsOverTime(stock_data, future_times, buy_value)