AmericanOption {RQuantLib} | R Documentation

## American Option evaluation using Finite Differences

### Description

This function evaluations an American-style option on a common stock using finite differences. The option value as well as the common first derivatives ("Greeks") are returned.

### Usage

    ## Default S3 method:
    AmericanOption(type, underlying, strike, dividendYield, riskFreeRate,
    maturity, volatility, timeSteps=150, gridPoints=151)

    ## 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
`timeSteps` | Time steps for the Finite Differences method, default value is 150
`gridPoints` | Grid points for the Finite Differences method, default value is 151

### Details

The Finite Differences method is used to value the American 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 `AmericanOption` (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 that under the new pricing framework used in QuantLib, binary pricers do not provide analytics for 'Greeks'. This is expected to be addressed in future releases of QuantLib.

### 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

`EuropeanOption`

### Examples

    # simple call with unnamed parameters
    AmericanOption("call", 100, 100, 0.02, 0.03, 0.5, 0.4)
    # simple call with some explicit parameters
    AmericanOption("put", strike=100, volatility=0.4, 100, 0.02, 0.03, 0.5)

[Package RQuantLib version 0.2.7 Index]