[R-SIG-Finance] euro call by integration

[Enrico Schumann]

On Sat, 13 Apr 2013, Dominykas Grigonis <dominykasgrigonis at gmail.com> writes:

> Valuing european call option by taking expectation and integrating:
>
> gmb <- function(x,s0=100,r=0.05,vol=0.1){
> s0*exp( (r - vol^2/2) + vol * x)}
>
> fun <- function(x, K=100){
> (gbm(x) - 100) * dnorm(x)}
>
> min = -(log(1) + (0.05-0.1^2/2)) / 0.1
> integrate(fun,min,Inf)
>
> could someone tell me what am I doing wrong? I do not even know if this is R related question or not... 
>
> returns 7.153855, while actual risk neutral price is 6.804958
>
> Thank you in advance.
>
> Kind regards,-- 
> Dominykas Grigonis
>

I did not run your code, but shouldn't you discount the result?



-- 
Enrico Schumann
Lucerne, Switzerland
http://enricoschumann.net