[R] cash or nothing option

From: Luca Aresu <aresuluca_at_libero.it>
Date: Tue, 19 Jun 2007 16:36:56 +0200

Hi, i need help building a program for the evaluation of a cash or nothing option. The option is written on a stock that today has a price of X. Nine months before i will have this situation:

If a<X<b the option pays 3 dollars
If X<a or X>b the option pays nothing

The price of the title is described by a geometric brownian motion, so i need to start a Montecarlo simulation to find the stock price using the gbm, and then using it for the evaluation of the option.

Many thanks to anyone.

Luca, from Italy.

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