EuropeanOption           package:RQuantLib           R Documentation

_E_u_r_o_p_e_a_n _O_p_t_i_o_n _e_v_a_l_u_a_t_i_o_n _u_s_i_n_g _C_l_o_s_e_d-_F_o_r_m _s_o_l_u_t_i_o_n

_D_e_s_c_r_i_p_t_i_o_n:

     The 'EuropeanOption' function evaluations an European-style option
     on a common stock using the Black-Scholes-Merton solution. The
     option value, the common first derivatives (\"Greeks\") as well as
     the calling parameters are returned.

_U_s_a_g_e:

     ## Default S3 method:
     EuropeanOption(type, underlying, strike,
             dividendYield, riskFreeRate, maturity, volatility)

     ## S3 method for class 'Option':
     plot
     ## S3 method for class 'Option':
     print
     ## S3 method for class 'Option':
     summary

_A_r_g_u_m_e_n_t_s:

    type: A string with one of the values 'call' or 'put'

underlying: Current price of the underlying stock

  strike: Strike price of the option

dividendYield: Continuous dividend yield (as a fraction) of the stock

riskFreeRate: Risk-free rate

maturity: Time to maturity (in fractional years)

volatility: Volatility of the underlying stock

_D_e_t_a_i_l_s:

     The well-known closed-form solution derived by Black, Scholes and
     Merton is used for valuation. Implied volatilities are calculated
     numerically.

     Please see any decent Finance textbook for background reading, and
     the 'QuantLib' documentation for details on the 'QuantLib'
     implementation.

_V_a_l_u_e:

     The 'EuropeanOption' function returns an object of class
     'EuropeanOption' (which inherits from class  'Option'). It
     contains a list with the following components: 

   value: Value of option

   delta: Sensitivity of the option value for a change in the
          underlying

   gamma: Sensitivity of the option delta for a change in the
          underlying

    vega: Sensitivity of the option value for a change in the
          underlying's volatility

   theta: Sensitivity of the option value for a change in t, the
          remaining time to maturity

     rho: Sensitivity of the option value for a change in the risk-free
          interest rate

dividendRho: Sensitivity of the option value for a change in the
          dividend yield

parameters: List with parameters with which object was created

_N_o_t_e:

     The interface might change in future release as 'QuantLib'
     stabilises its own API.

_A_u_t_h_o_r(_s):

     Dirk Eddelbuettel edd@debian.org for the R interface; the QuantLib
     Group for 'QuantLib'

_R_e_f_e_r_e_n_c_e_s:

     <URL: http://quantlib.org> for details on 'QuantLib'.

_S_e_e _A_l_s_o:

     'EuropeanOptionImpliedVolatility', 'EuropeanOptionArrays',
     'AmericanOption','BinaryOption'

_E_x_a_m_p_l_e_s:

     # simple call with unnamed parameters
     EuropeanOption("call", 100, 100, 0.01, 0.03, 0.5, 0.4)
     # simple call with some explicit parameters, and slightly increased vol:
     EuropeanOption(type="call", underlying=100, strike=100, dividendYield=0.01, 
     riskFreeRate=0.03, maturity=0.5, volatility=0.5)

