[R-SIG-Finance] Financial Basket Options

[Moshe Olshansky]

Hi Dirk,

I considered using QuantLib, but as you mention it's R
wrapper does not include Basket option.
So the choices I had were either to invoke it using
C++ or to code my own implementation in R. Since
QuantLib contains many classes and I have never used
it before I decided that coding in R will take me less
time and will allow me to add more stuff in the future
(for example getting the upper bound).
My new job is not exactly in Finance (even though it
is also business-oriented) and so I have less strive
to complete this task now, but on the other hand this
is an interesting problem (mathematically) and so I
may continue. 
To be honest, I am not sure about it's importance in
finance, since the theoretical price is not always the
correct one...

Regards,

Moshe.

--- Dirk Eddelbuettel <edd at debian.org> wrote:

> 
> Sorry, I meant to chime in earlier on this. Did any
> of you look at QuantLib?
> AFAICT it has a basketoption class allowing for
> multiple assets, Monte Carlo
> pricers for american and european exercise as well
> as Stulz (1992) method.  
> 
> I often look at the available code via what's in the
> regression tests, so
> here is the header test-suite/basketoption.hpp:
> 
> class BasketOptionTest {
>   public:
>     static void testEuroTwoValues();
>     static void testBarraquandThreeValues();
>     static void testTavellaValues();
>     static void testOneDAmericanValues();
>     static void testOddSamples();
>     static boost::unit_test_framework::test_suite*
> suite();
> };
> 
> My RQuantLib package currently does not wrap basket
> options, but has a few
> other exotics one could take as a stanza.  Building
> the package is possible
> on both Windows and Linux, but somewhat more tedious
> on the former (as you
> need to build QL and Boost first).  My main
> contributor Dominick has a
> tarball with that prebuilt if it is of interest.  If
> there is interest, we
> could add this to RQuantLib.  
> 
> Hth, Dirk
> 
> -- 
> Three out of two people have difficulties with
> fractions.
>