[R-SIG-Finance] Barrier options

[Samuel Le]

My quick and dirty way to compute the Greeks: the finite difference method.
For example to compute the Delta:

epsilon<-0.001
x1<-BarrierOption(barrType="downin", type="call", underlying=100+epsilon,strike=100, dividendYield=0.02, riskFreeRate=0.03,maturity=0.5, volatility=0.4, barrier=90)
x2<-BarrierOption(barrType="downin", type="call", underlying=100-epsilon,strike=100, dividendYield=0.02, riskFreeRate=0.03,maturity=0.5, volatility=0.4, barrier=90)
delta<-(x1-x2)/(2*epsilon)

You might want to create a wrapper function that would call the RQuantLib function BarrierOption, get the price, compute the Greeks by finite difference, and wraps everything into a data.frame / S4 object of the same format as the RQuantLib function.

Samuel


-----Original Message-----
From: r-sig-finance-bounces at stat.math.ethz.ch [mailto:r-sig-finance-bounces at stat.math.ethz.ch] On Behalf Of Megh
Sent: 03 November 2010 12:53
To: r-sig-finance at stat.math.ethz.ch
Subject: Re: [R-SIG-Finance] Barrier options


Thanks everyone for showing interest on my problem. On installing QL I feel
some problems are there for vista+2.12.0 combination. I could install
perfectly in xp+2.10.1 machine without any problem. However I used rmetrics
package for valuation of barrier option.

But in fExoticOptions package there seems to be no option to find greeks of
barrier option. BarrierOption() function of RQuantLib() has option for
sensitivity as well, however all the examples I have tried give NaN value
for sensitivity:

> BarrierOption(barrType="downin", type="call", underlying=100,
+              strike=100, dividendYield=0.02, riskFreeRate=0.03,
+              maturity=0.5, volatility=0.4, barrier=90)
Concise summary of valuation for BarrierOption
 value  delta  gamma   vega  theta    rho divRho
3.7383    NaN    NaN    NaN    NaN    NaN    NaN


Can anyone help me to calculate greeks as well for Barrier option?

Thanks,
--
View this message in context: http://r.789695.n4.nabble.com/Barrier-options-tp3021886p3025292.html
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