Abstract:
In this talk, I am going to revisit various numerical approaches of the option pricing theory, with special emphasis on the use of RCpp wrapper. The latter is a very convenient C++/R hybrid library that exports C++ code to the statistical R interface. The advantages of this wrapper are manifold. First, the software industry today is mainly governed by the C++ community with lots of useful C++ libraries in the archive. Modern C++ codes have proven to be safe and efficient, which are usually unbeatable by other languages. Hence, it is definitely wise to incorporate them into the R community instead of re-writing new R codes that have the same functionalities, thus speeding up development time by reducing bugs in the codes. Second, given its great convenience and applicability, R has always been a popular software among the statisticians/ financial analysts. Users of this genre normally want fast and free-of-trouble solution for their problems. This is basically the essence behind the RCpp wrapper, in which I will describe them in detail during my talk. The numerical approaches for RCpp illustration include the finite difference and Monte Carlo methods, which are applied to determine the prices of European and American options respectively. If time permits, I will also look at some exotic options in greater detail.
Coffee and tea will be served 20 minutes prior to the seminar.