LadderMC {QFRM} | R Documentation |
Calculates the price of a Ladder Option using 5000 Monte Carlo simulations. The helper function LadderCal() aims to calculate expected payout for each stock prices.
Important Assumptions:
The option o follows a General Brownian Motion (BM)
ds = mu * S * dt + sqrt(vol) * S * dW
where dW ~ N(0,1)
.
The value of mu
(the expected price increase) is assumed to be o$r
, the risk free rate of return.
LadderMC(o = OptPx(o = Opt(Style = "Ladder"), NSteps = 5), NPaths = 5,
L = c(60, 80, 100))
o |
The |
NPaths |
The number of simulation paths to use in calculating the price |
L |
A series of ladder strike price. |
The option o
with the price in the field PxMC
based on MC simulations
and the ladder strike price L
set by the users themselves
Huang Jiayao, Risk Management and Business Intelligence at Hong Kong University of Science and Technology, Exchange student at Rice University, Spring 2015
(o = LadderMC())$PxMC #Price = ~12.30
o = OptPx(o=Opt(Style='Ladder'), NSteps = 5)
(o = LadderMC(o))$PxMC #Price = ~11.50
o = OptPx(Opt(Style='Ladder', Right='Put'))
(o = LadderMC(o, NPaths = 5))$PxMC # Price = ~12.36
(o = LadderMC(L=c(55,65,75)))$PxMC # Price = ~10.25