BinaryOption {RQuantLib} | R Documentation

## Binary Option evaluation using Closed-Form solution

### Description

This function evaluations an Binary option on a common stock using a closed-form solution. The option value as well as the common first derivatives ("Greeks") are returned.

### Usage

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

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

### Arguments

`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
`cashPayoff` | Payout amount

### Details

A closed-form solution is used to value the Binary Option.

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

### Value

An object of class `BinaryOption` (which inherits from class `Option`) is returned. 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

### Note

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

### Author(s)

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

### References

http://quantlib.org for details on `QuantLib`.

### See Also

`AmericanOption`,`EuropeanOption`

### Examples

    BinaryOption("call", 100, 100, 0.02, 0.03, 0.5, 0.4, 10)

[Package RQuantLib version 0.2.7 Index]