[R-SIG-Finance] fExoticOptions - CashOrNothingOption discrepancy
Shing Hing Man
matmsh at yahoo.com
Sat Apr 30 14:45:44 CEST 2011
Hi,
I am using CashOrOrNothingOption in fExoticOptions to verify
Example 2.11.2 in the book
The complete guide to option pricing formulas (first edition) , by Espen Haug
> CashOrNothingOption(TypeFlag = "p", S=100, X=80, Time=0.75, K=10, r = 0.06,b = 0, sigma = 0.35)@price
[1] 2.215541
In the book, the answer is 2.6710.
However, if I changed b to -0.06, I have the answer matching the one in the book.
> CashOrNothingOption(TypeFlag = "p", S=100, X=80, Time=0.75, K=10, r = 0.06,b = -0.06, sigma = 0.35)@price
[1] 2.671045
Is this is a bug or I have misunderstood the b ?
Thanks in advance for any assistance !
Shing
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