m4fe (version 0.1)

asianOption: Asian Option Price

Description

Returns the price of an asian option using a binomial tree approach

Usage

asianOption(S, K, r, delta, sigma, t = 1, call = TRUE, arithmetic = TRUE, price = TRUE, h = 10)

Arguments

S

the initial stock price

K

the strike price

r

the risk free (continuously compounded interest rate)

delta

the annual dividend rate

sigma

the volatility

t

the expiration time (default one year)

call

TRUE if option is a call, FALSE is option is a put

arithmetic

TRUE if arithmetic average is used, FALSE if geometric average is used

price

TRUE if average price is used, FALSE if average strike is used

h

the number of subdivisions between 0 and t (default 10)

Details

Uses a forward tree to compute u and d. p is the risk-neutral probability

Examples

asianOption(40, 39, 0.05, 0, 0.3, 3/12, call=FALSE, arithmetic=TRUE, price=TRUE, h=3)