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Learning Quantitative Finance with R

You're reading from   Learning Quantitative Finance with R Implement machine learning, time-series analysis, algorithmic trading and more

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Product type Paperback
Published in Mar 2017
Publisher Packt
ISBN-13 9781786462411
Length 284 pages
Edition 1st Edition
Languages
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Authors (2):
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PRASHANT VATS PRASHANT VATS
Author Profile Icon PRASHANT VATS
PRASHANT VATS
Dr. Param Jeet Dr. Param Jeet
Author Profile Icon Dr. Param Jeet
Dr. Param Jeet
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Toc

Table of Contents (10) Chapters Close

Preface 1. Introduction to R 2. Statistical Modeling FREE CHAPTER 3. Econometric and Wavelet Analysis 4. Time Series Modeling 5. Algorithmic Trading 6. Trading Using Machine Learning 7. Risk Management 8. Optimization 9. Derivative Pricing

Exotic options


Asian, barrier, binary, and lookback options are a few exotic options. Exotic options are quite different than normal American or European options, or vanilla options, and have a few new features which make it quite complex to price. An American or European call or put option is considered as a non-exotic or vanilla option. Exotic options are complex because of a few features:

  • The way it gets settled varies depending on the moneyless of the option at the time of maturity. It can be settled in cash as well as stock options.

  • It could also involve foreign exchange rates.

  • Payoff at the time of maturity depends not just on the underlying stock price but on its value at several times during the contract life.

We will be using the fExoticOptions package to price various types of exotic options. For this, the following two lines of code are used to install and load this package into the R workspace:

> install.packages('fExoticOptions') 
> library(fExoticOptions) 

Asian options can...

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