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Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook




                                   Using R in Finance

                                    Dirk Eddelbuettel, Ph.D.
                                      Debian and R Projects



                             Invited Panel Presentation at the
                       58th Midwest Finance Association Meetings
                               Chicago, IL, March 5, 2009




                                     Dirk Eddelbuettel   Using R in Finance
Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook

 Outline


      Background

      About R and CRAN

      Finance Task View

      Selected Finance Packages

      Summary and Outlook




                                     Dirk Eddelbuettel   Using R in Finance
Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook

 Personal connections


             Financial Econometrician by training, with twelve+ years as
             a Quant in (Inv-)Banking, Hedge Funds, Prop Trading
             Debian developer/contributor since 1995
             Debian R co-maintainer since 1999, maintainer since 2001
             R package author or co-author:
                   RQuantLib: R interface to the QuantLib libraries
                   digest: hash function ’digests’ of serialized R objects
                   random: R interface to true RNG via random.org
                   RDieHarder: R interface to DieHarder RNG testers
                   littler: R scripting front-end
                   RPostgreSQL: R interface to PostgreSQL RDBMS
                   Rcpp: C++ classes for extending R with C/C++ functions
                   RInside: C++ classes for embedding R in C++ programs



                                     Dirk Eddelbuettel   Using R in Finance
Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook

 Personal connections

             Other R Open Source activities:
                   R-SIG-Finance, R-SIG-Debian, R-SIG-HPC list ’owner’
                   Editor of CRAN Task Views Empirical Finance and High
                   Performance Computing
                   Mentor for two R-related projects (cran2deb; RPostgreSQL)
                   at Google Summer of Code
                   Co-organizer of the first R in Finance conference in April
                   2009, Chicago (http://www.RinFinance.com)
                   useR! Tutorial lecturer on High Performance Computing
                   with R in 2008 and 2009, also at R / Finance
             Other work-related R projects (spawning the CRAN
             packages RLim, RBloomberg; others unreleased)
             Quantian (live cdrom/dvd) author / developer
             Associate Editor at Journal of Statistical Software


                                     Dirk Eddelbuettel   Using R in Finance
Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook

 Outline


      Background

      About R and CRAN

      Finance Task View

      Selected Finance Packages

      Summary and Outlook




                                     Dirk Eddelbuettel   Using R in Finance
Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook

 Where are we right now with R ?


             R has grown tremendously in recent years, both in terms of
             capabilities and users.
             Widespread and increasing use in Finance.
             S+ has been almost entirely eclipsed by R, much to the
             chagrin of Insightful.
             We now also have three companies offering commercial
             support and extensions.
             CRAN, the R package archive network, has grown
             tremendously too: now north of 1600 packages.
             There is more and more Finance content as shown in the
             task view.



                                     Dirk Eddelbuettel   Using R in Finance
Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook

          Illustration: Growth of r-help and r-sig-finance

                                          q     R−Help                                                        q
                                                R−SIG−Finance
                                  2000




                                                                                                          q
                                                                                                  q
                                                                                       q
                                                                                             q
                                                                                                                               Total R usage is difficult
                                                                                  q
                                                                                                                               to measure.
                                  1000




                                                                       q
Mean Number of Messages / Month




                                                                 q                                                             Mailing list activity is
                                  500




                                                            q                                                                  sometimes used as a
                                                                                                                               proxy.
                                  200




                                                      q
                                                                                                                               While r-help growth is
                                                 q                                                                             slowing, several ’special
                                  100




                                                                                                                               interest group’ lists such
                                          q
                                  50




                                                                                                                               as r-sig-finance
                                                                                                                               experience strong
                                                                                                                               growth.
                                  20




                                         1997        1999       2001         2003          2005       2007

                                                                           Year


                                         Source: Fox (2008, 2009), our calculations.
                                                                                      Dirk Eddelbuettel       Using R in Finance
Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook

          Illustration: Growth of CRAN packages
                                  1.3

                                               1.4

                                                            1.5



                                                                         1.7
                                                                                      1.8

                                                                                                   1.9
                                                                                                   2.0

                                                                                                                2.1

                                                                                                                             2.2
                                                                                                                                          2.3

                                                                                                                                                       2.4
                                                                                                                                                       2.5

                                                                                                                                                                    2.6
                                                                                                                                                                    2.7

                                                                                                                                                                                 2.8
                          1700                                                                                                                                                   q             1679
                          1400                                                                                                                                            q                    1427
                          1200
                                                                                                                                                                    q                          1300
                                                                                                                                                                                                               John Fox provided this
                          1000                                                                                                                              q                                  1000

                          800
                                                                                                                                                       q                                       911             chart in an invited lecture
Number of CRAN Packages




                                                                                                                                          q                                                    739

                          600
                                                                                                                             q                                                                 647             at the last useR!
                                                                                                                q                                                                              548
                          500                                                                                                                                                                                  meetings.
                          400                                                                            q                                                                                     406
                                                                                                   q                                                                                           357             Details, and more
                          300
                                                                                      q                                                                                                        273
                                                                                                                                                                                                               metrics on R and the
                                                                         q                                                                                                                     219
                          200                                                                                                                                                                                  dynamics of the R Core
                                                            q                                                                                                                                  162

                                               q                                                                                                                                               129
                                                                                                                                                                                                               group, are also in a
                          100
                                  q                                                                                                                                                            110             forthcoming R News
                                                                                                                                                                                                               (soon: R Journal) article.
                                  2001−06−21

                                               2001−12−17

                                                            2002−06−12



                                                                         2003−05−27
                                                                                      2003−11−16

                                                                                                   2004−06−05
                                                                                                   2004−10−12

                                                                                                                2005−06−18

                                                                                                                             2005−12−16
                                                                                                                                          2006−05−31

                                                                                                                                                       2006−12−12
                                                                                                                                                       2007−04−12

                                                                                                                                                                    2007−11−16
                                                                                                                                                                    2008−03−18

                                                                                                                                                                                 2008−10−20




                                 Source: Fox (2008, 2009), our calculations
                                                                                                                                 Dirk Eddelbuettel                                            Using R in Finance
Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook

 Aside: CRANberries



                                                                          The CRANberries feed
                                                                          summarizes both
                                                                          changes to existing
                                                                          packages, as well as
                                                                          new packages.
                                                                          Implemented in 200 lines
                                                                          of R and using the tiny
                                                                          blosxom blog engine, it
                                                                          is available as a blog and
                                                                          via an RSS feed.

                          Source:
http://dirk.eddelbuettel.com/cranberries/
                                     Dirk Eddelbuettel   Using R in Finance
Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook

 Outline


      Background

      About R and CRAN

      Finance Task View

      Selected Finance Packages

      Summary and Outlook




                                     Dirk Eddelbuettel   Using R in Finance
Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook

 CRAN and CRAN Task View Finance

             Given 1600+ CRAN packages, navigation is difficult.
             Idea suggested a few years ago to have topical views.
             These Task Views are not perfect, but the best currently
             available approach at navigating CRAN packages.
             We created the Empirical Finance view around 2004 which
             contains several sections on
                   standard regression models
                   time series
                   finance
                   risk management
                   books / data sets
                   date and data management
             Rather than repeating the task view, let us illustrate several
             different packages.

                                     Dirk Eddelbuettel   Using R in Finance
Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook

 Finance Task View




                                     Dirk Eddelbuettel   Using R in Finance
Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook

 Outline


      Background

      About R and CRAN

      Finance Task View

      Selected Finance Packages

      Summary and Outlook




                                     Dirk Eddelbuettel   Using R in Finance
Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook

  RQuantLib (QuantLib Group; Eddelbuettel)

              option value                                      option delta




                                            1.0
80




                                                                                                      QuantLib is a very


                                            0.8
60




                                                                                                      complete and very well

                                            0.6
40




                                                                                                      written C++ library for
                                            0.4                                                       quantitative finance.
20




                                            0.2
                                            0.0



                                                                                                      RQuantLib, first
0




         50        100         150                         50           100    150
              option gamma                                      option vega                           released in 2002,
                                            40
0.04




                                                                                                      provides access to a
                                            30
0.03




                                                                                                      subset of QuantLib’s
0.02




                                            20




                                                                                                      functionality directly from
                                                                                                      R, in particular for
0.01




                                            10




                                                                                                      (equity) option pricing
0.00




                                            0




         50        100         150                         50
                   Strike is 100, maturity 1 year, riskless rate 0.03
                                                                        100    150
                                                                                                      and some yield curve
                            Underlying price from 10 to 180
                               Volatility from 0.1 to 0.9                                             analysis.
       > example(EuropeanOptionArrays)
                                                      Dirk Eddelbuettel              Using R in Finance
Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook

      Rmetrics (Wuertz et al)

                                        Excess Distribution                                                                                                Tail of Underlying Distribution
                1.0




                                                                                       qq q
                                                                                     qqq
                                                                                     qq
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                                                                                         q                                                           q q     q qq qq qqqq qqqqqqq
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                                                                                                                                            5e−01
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                                                                             qq                                                                                                                    q
                                                                                                                                                                                                   q
                0.8




                                                                             q
                                                                             q
                                                                             q                                                                                                                     qq
                                                                                                                                                                                                    q
                                                                                                                                                                                                    q
                                                                            q                                                                                                                       q


                                                                                                                                                                                                                                   Rmetrics, first released
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                                                                          q
                                                                          q                                                                                                                             qq
                                                                                                                                                                                                         q
                                                                                                                                                                                                         q




                                                                                                                    1−F(x) [log scale]
                                                                         qq
                                                                          q                                                                                                                              qq
                                                                                                                                                                                                          q
                                                                         q                                                                                                                                q




                                                                                                                                            5e−02
                                                                         q
                                                                         q
                                                                         q                                                                                                                                q
                                                                                                                                                                                                          qq
                                                                         q                                                                                                                                 q
x [log Scale]




                                                                        q                                                                                                                                  q
                0.6




                                                                        q
                                                                        q
                                                                        q                                                                                                                                  q
                                                                                                                                                                                                           q
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                                                                                                                                                                                                            q


                                                                                                                                                                                                                                   in 2004 is a
                                                                       q
                                                                       q
                                                                       q                                                                                                                                    qq
                                                                      q
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                                                                   qq                                                                                                                                           q
                                                                                                                                                                                                                q
                0.4




                                                                   q
                                                                   q
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                                                                                                                                                                                                                q
                                                                  q
                                                                  qq                                                                                                                                             q
                                                                  q                                                                                                                                              q




                                                                                                                                            5e−03
                                                                 q
                                                                 qq                                                                                                                                              q
                                                                 q
                                                                 q
                                                                 q                                                                                                                                               q


                                                                                                                                                                                                                                   comprehensive set of R
                                                                q
                                                                qq                                                                                                                                               q
                                                               qq
                                                                q                                                                                                                                                q
                                                               q
                                                               q
                                                               q
                                                                                                     u = 0.000599

                                                             qq
                                                              q
                                                              q                                                                                                                                                   q
                                                             q
                                                             q
                                                             q
                0.2




                                                            q
                                                            qq                                                                                                                                                    q
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                                                     q


                                                                                                                                                                                                                                   packages.
                                                    q
                                                   qq
                                                  qq
                                                   q
                                                 qq
                                                qq
                                                                                                                                            5e−04
                                                qq
                                               qq
                                             q q
                                            qq q
                                           qq q
                0.0




                          q q    q qq qq qqq
                                  q qq q q q                                                                                                                                                                          q



                      1e−03           1e−02           1e−01            1e+00           1e+01                                                        1e−03         1e−02        1e−01          1e+00            1e+01

                                                      Fu(x−u)                                                                                                                x [log scale]                                         It covers time series,
                                   Scatterplot of Residuals                                                                                                       QQ−Plot of Residuals                                             GARCH and volatility
                                                                                                                                                                                                                                   modeling, Extreme Value
                6




                                            q                                                                                                                                                                             q

                                                                                   q
                                                    q
                                                                    q q
                                                                                                                                                                                                                  q
                5




                       q                                     q            q
                            qq
                                                                                                                                                                                                              q

                                                                                                                                                                                                                                   Theory and Copulae,
                                                                                                                                            6




                                    q                              q
                      q                                    q q
                                                                                                                    Exponential Quantiles




                                                                                                                                                                                                             q
                                 q                                                          qq                                                                                                              q
                                                   q                                  q q                                                                                                               q
                4




                                                                                                                                                                                                       q
                                              q              q           q                 q                                                                                                           q
                                                                                                                                                                                                       q
                                                                 q
                               q                                                                                                                                                                     qq
Residuals




                                                                                      q
                         qq
                          q               q                  q                 q qq      q                                                                                                         qqq


                                                                                                                                                                                                                                   derivative pricing,
                                     q
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                                                                                                                                            4




                                       q                  q q  q q q qq    q                  q                                                                                               qq
                3




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                2




                              q q qq q                                                                                                                                           qq
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                                                                                                                                                                                                                                   portfolio analysis,
                                                                                            q
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                                                        q
                                                     qq q q        qq q qq q qq qq q q
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                                        q      qq q q qq                           q qq q                                                                                 qq
                                                                                                                                            2




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                1




                        q qq q q qq q q qq q q q q q q qqq q q q q qq q q qq
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                                                                             qq qq               q                                                           qq
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                                                                                                                                                            qq
                                                                                                                                                            qq
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                               q qq       qq q q q q q q qq

                                                                                                                                                                                                                                   optimization and more.
                             qq                                                              q
                               q                                           qq
                                                     q q qq qq q q qqq qq q q q qq
                                                                           qq q
                                                                q q q q q qq q q q
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                        qq qq q q q q     q qq q                                               q
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                       qq q q qqq qq q qqqq qqqqq qqq q qq q q qq q qq qq qq
                                                      q q      qq      q qq q q qq q    qq q                                                           qq
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                                          q q        q q        q q           q q       q
                                                                             q qq qq qq q                                                            qq
                                                                                                                                                     qq
                                                                                                                                                     qq
                                                                                                                                                    qq
                                                                                                                                                    qq
                                                                                                                                                    qq
                0




                                                                                                                                            0




                      0           200            400             600           800           1000                                                   0         1          2          3          4           5              6

                                                     Ordering                                                                                                                Ordered Data




                                                > example(GpdModelling)
                                                                                                                                                     Dirk Eddelbuettel                                            Using R in Finance
Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook

 portfolio (Enos, Kane et al)

                                                  Cumulative Spread Return



                20
                     Total return: −2.7
                                          cap.usd
                                                                        Total return: 28
                                                                                             smi
                                                                                                                                The portfolio
Return (%)




                10
                 0                                                                                                              package provides code
               −10
               −20
                     Worst drawdown: −9                                 Worst drawdown: −−                                      and data for real-life
                        Mar      May        Jul      Sep   Nov             Mar       May     Jul   Sep   Nov
                                                                                                                                equity long/short portfolio
                                              Cumulative Quantile Return                                                        analysis.
                                          cap.usd                                            smi                                The portfolioSim
               30
                                 quantile                                                                                       package adds simulation
                              high
                              Q9
                              Q8                                                                                                support; the tradeCost
  Return (%)




                              Q7
               20             Q6
                              Q5
                              Q4
                                                                                                                                package analyses
                              Q3
               10             Q2
                              low                                                                                               ex-post trade impact, and
                0                                                                                                               the backtest package
                       Mar       May        Jul      Sep   Nov            Mar       May      Jul   Sep   Nov                    permits to test portfolios.
                                                                 Date



                                          > example(backtest)
                                                                              Dirk Eddelbuettel                Using R in Finance
Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook

 PerformanceAnalytics (Carl and Peterson)

                                          Equity.Market.Neutral


                                                                                                    This package provides a
                             99% VaR
                         99 % ModVaR




                                                                                                    library of econometric
          100




                                                                                                    functions for
          80




                                                                                                    performance and risk
                                                                                                    analysis of financial
          60
Density




                                                                                                    portfolios.
                                                                                                    It offers practioners and
          40




                                                                                                    researcher some of the
                                                                                                    latest research in
          20




                                                                                                    analysis of both normal
          0




                                                                                                    and non-normal return
                −0.010       −0.005    0.000   0.005   0.010    0.015   0.020   0.025
                                                                                                    streams.
                                                  Returns



                    > example(chart.Histogram)
                                                            Dirk Eddelbuettel      Using R in Finance
Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook

 Outline


      Background

      About R and CRAN

      Finance Task View

      Selected Finance Packages

      Summary and Outlook




                                     Dirk Eddelbuettel   Using R in Finance
Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook

 Summary


             R is a very vibrant platform for data analysis, visualization
             and programming with data.
             Hence, R provides an excellent platform for academic
             research and teaching — as well as investment research
             and trading.
             Finance has traditionally been one of the two key users of
             the S language, and this constiuency has moved from S+
             to R.
             The number of dedicated Finance packages for R is
             increasing as well, the R-Forge site is a good place to
             watch (http://R-Forge.R-Project.org).



                                     Dirk Eddelbuettel   Using R in Finance
Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook

 Outlook




               If you don’t go with R now, you will someday.
                   – David Kane on r-sig-finance, 30 Nov 2004




                                     Dirk Eddelbuettel   Using R in Finance
Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook

 R / Finance in April 2009




                                     Dirk Eddelbuettel   Using R in Finance
Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook

 Contact




                         http://dirk.eddelbuettel.com

                                dirk@eddelbuettel.com




                                     Dirk Eddelbuettel   Using R in Finance

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Using R in Finance

  • 1. Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook Using R in Finance Dirk Eddelbuettel, Ph.D. Debian and R Projects Invited Panel Presentation at the 58th Midwest Finance Association Meetings Chicago, IL, March 5, 2009 Dirk Eddelbuettel Using R in Finance
  • 2. Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook Outline Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook Dirk Eddelbuettel Using R in Finance
  • 3. Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook Personal connections Financial Econometrician by training, with twelve+ years as a Quant in (Inv-)Banking, Hedge Funds, Prop Trading Debian developer/contributor since 1995 Debian R co-maintainer since 1999, maintainer since 2001 R package author or co-author: RQuantLib: R interface to the QuantLib libraries digest: hash function ’digests’ of serialized R objects random: R interface to true RNG via random.org RDieHarder: R interface to DieHarder RNG testers littler: R scripting front-end RPostgreSQL: R interface to PostgreSQL RDBMS Rcpp: C++ classes for extending R with C/C++ functions RInside: C++ classes for embedding R in C++ programs Dirk Eddelbuettel Using R in Finance
  • 4. Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook Personal connections Other R Open Source activities: R-SIG-Finance, R-SIG-Debian, R-SIG-HPC list ’owner’ Editor of CRAN Task Views Empirical Finance and High Performance Computing Mentor for two R-related projects (cran2deb; RPostgreSQL) at Google Summer of Code Co-organizer of the first R in Finance conference in April 2009, Chicago (http://www.RinFinance.com) useR! Tutorial lecturer on High Performance Computing with R in 2008 and 2009, also at R / Finance Other work-related R projects (spawning the CRAN packages RLim, RBloomberg; others unreleased) Quantian (live cdrom/dvd) author / developer Associate Editor at Journal of Statistical Software Dirk Eddelbuettel Using R in Finance
  • 5. Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook Outline Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook Dirk Eddelbuettel Using R in Finance
  • 6. Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook Where are we right now with R ? R has grown tremendously in recent years, both in terms of capabilities and users. Widespread and increasing use in Finance. S+ has been almost entirely eclipsed by R, much to the chagrin of Insightful. We now also have three companies offering commercial support and extensions. CRAN, the R package archive network, has grown tremendously too: now north of 1600 packages. There is more and more Finance content as shown in the task view. Dirk Eddelbuettel Using R in Finance
  • 7. Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook Illustration: Growth of r-help and r-sig-finance q R−Help q R−SIG−Finance 2000 q q q q Total R usage is difficult q to measure. 1000 q Mean Number of Messages / Month q Mailing list activity is 500 q sometimes used as a proxy. 200 q While r-help growth is q slowing, several ’special 100 interest group’ lists such q 50 as r-sig-finance experience strong growth. 20 1997 1999 2001 2003 2005 2007 Year Source: Fox (2008, 2009), our calculations. Dirk Eddelbuettel Using R in Finance
  • 8. Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook Illustration: Growth of CRAN packages 1.3 1.4 1.5 1.7 1.8 1.9 2.0 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 1700 q 1679 1400 q 1427 1200 q 1300 John Fox provided this 1000 q 1000 800 q 911 chart in an invited lecture Number of CRAN Packages q 739 600 q 647 at the last useR! q 548 500 meetings. 400 q 406 q 357 Details, and more 300 q 273 metrics on R and the q 219 200 dynamics of the R Core q 162 q 129 group, are also in a 100 q 110 forthcoming R News (soon: R Journal) article. 2001−06−21 2001−12−17 2002−06−12 2003−05−27 2003−11−16 2004−06−05 2004−10−12 2005−06−18 2005−12−16 2006−05−31 2006−12−12 2007−04−12 2007−11−16 2008−03−18 2008−10−20 Source: Fox (2008, 2009), our calculations Dirk Eddelbuettel Using R in Finance
  • 9. Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook Aside: CRANberries The CRANberries feed summarizes both changes to existing packages, as well as new packages. Implemented in 200 lines of R and using the tiny blosxom blog engine, it is available as a blog and via an RSS feed. Source: http://dirk.eddelbuettel.com/cranberries/ Dirk Eddelbuettel Using R in Finance
  • 10. Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook Outline Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook Dirk Eddelbuettel Using R in Finance
  • 11. Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook CRAN and CRAN Task View Finance Given 1600+ CRAN packages, navigation is difficult. Idea suggested a few years ago to have topical views. These Task Views are not perfect, but the best currently available approach at navigating CRAN packages. We created the Empirical Finance view around 2004 which contains several sections on standard regression models time series finance risk management books / data sets date and data management Rather than repeating the task view, let us illustrate several different packages. Dirk Eddelbuettel Using R in Finance
  • 12. Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook Finance Task View Dirk Eddelbuettel Using R in Finance
  • 13. Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook Outline Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook Dirk Eddelbuettel Using R in Finance
  • 14. Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook RQuantLib (QuantLib Group; Eddelbuettel) option value option delta 1.0 80 QuantLib is a very 0.8 60 complete and very well 0.6 40 written C++ library for 0.4 quantitative finance. 20 0.2 0.0 RQuantLib, first 0 50 100 150 50 100 150 option gamma option vega released in 2002, 40 0.04 provides access to a 30 0.03 subset of QuantLib’s 0.02 20 functionality directly from R, in particular for 0.01 10 (equity) option pricing 0.00 0 50 100 150 50 Strike is 100, maturity 1 year, riskless rate 0.03 100 150 and some yield curve Underlying price from 10 to 180 Volatility from 0.1 to 0.9 analysis. > example(EuropeanOptionArrays) Dirk Eddelbuettel Using R in Finance
  • 15. Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook Rmetrics (Wuertz et al) Excess Distribution Tail of Underlying Distribution 1.0 qq q qqq qq qq qq q q q q qq qq qqqq qqqqqqq q qq q q qqq qqqqqq q qqqqqqq q qqq q qq q qqqqq q qqq qq qq qq qqqq qqqq qqq qqq qqq 5e−01 q qqq qq qq qq qq q q qq qq qq qq qq qq q q qq qq qq qq q qq qq qq q qq q q q q q q q q qq q q q q q q q q q q qq q q 0.8 q q q qq q q q q Rmetrics, first released q q q q q q q q q q q q q q q q q q qq qq q q q q qq q q 1−F(x) [log scale] qq q qq q q q 5e−02 q q q q qq q q x [log Scale] q q 0.6 q q q q q q q q q q q q q q q q in 2004 is a q q q qq q q q q q q qq q q q q q qq q q q q q q qq qq q q 0.4 q q q q q q qq q q q 5e−03 q qq q q q q q comprehensive set of R q qq q qq q q q q q u = 0.000599 qq q q q q q q 0.2 q qq q q qq q q qq q qq q qqq q q qq qq qq qq q q packages. q qq qq q qq qq 5e−04 qq qq q q qq q qq q 0.0 q q q qq qq qqq q qq q q q q 1e−03 1e−02 1e−01 1e+00 1e+01 1e−03 1e−02 1e−01 1e+00 1e+01 Fu(x−u) x [log scale] It covers time series, Scatterplot of Residuals QQ−Plot of Residuals GARCH and volatility modeling, Extreme Value 6 q q q q q q q 5 q q q qq q Theory and Copulae, 6 q q q q q Exponential Quantiles q q qq q q q q q 4 q q q q q q q q q qq Residuals q qq q q q q qq q qqq derivative pricing, q q qq q qq q q q q q q q q qq q 4 q q q q q q qq q q qq 3 q qq q qq q q q q q q q qq q q q q q qqq q q q qq q qq qqq q qqq q qq q q qq qq q q qq q q q qq q q q q q q q qq q q q q q q q q qq q qq qq q q q q q qq q q q q q q q q q q q qq q qq q qq q q q q q q q q q qq 2 q q qq q qq qqq portfolio analysis, q q qqq qq q q qq q q qq q qq q q qq q qq q qq qq q q q qq qq qq q q q q q q qq qq qq qq q q q q q q q q qq qq qq qq q q q qqqqqqqqq q q q q qq q q qq q q qq q qq q qq 2 q qq q q qq q q q qq q q q q q qq q q qq qq qq qq q q q qq qq q q q qq q q q qq qq q q qqq qq q q qq qq qq qq q q q q q q q qq qq q q q q q qq q q q q q q q q qqq q q q q qqq q qq q q qq qq q q qq q q q qq qq q q qq q q qq q qq q q q qq q q qq q qq q q q qq qqqq qq qq q q qqq q q q q q qq qq qq q q q q qq q q q qq q q q qq qq 1 q qq q q qq q q qq q q q q q q qqq q q q q qq q q qq q q q qq q q q q q q q q q qq q q qq qq qq qq qq qq q q q q q q q qq qq qq qq q q q qqqq q q q q q q q q q q q q qq q qq q q qq qq qq q q qq q qq q q qqq qq q qqq qqq qqqq qq qq qq q q q qq qqqqqqqqq q qqq qq qq q qq q q qq q q q q q q qq q qqqq qq qq qq q qqqq qq qq qq qq qq q qq qq qq qq qq qq q qq qq q q q q q q qq optimization and more. qq q q qq q q qq qq q q qqq qq q q q qq qq q q q q q q qq q q q qq qq qq qq qq qq qq qq q q qqqqq q q qq qqqq qqq qqq qqq qqqq qqq qqqqq qqq q q qqq qq qq qq q q q q q qq q q qq qq q qq q q q q q q qqq q q qq q q q qqq qq qq q qq q qq q q q qqq q q qq q q qqq qqqqqqqq qqqqqqqqqqq qqqqqqqqqqqq q qqqqqqq qqqq qq q q qqq qq q qqqq qqqqq qqq q qq q q qq q qq qq qq q q qq q qq q q qq q qq q qq qq qq qq qqq q q q q q q q q q qq q q q q q qqq q qq q qq qq q qq q qqqqqqq qq qqq qq q q q qq q q q q q q q q q q q q q q q q q q q qq qq qq q qq qq qq qq qq qq 0 0 0 200 400 600 800 1000 0 1 2 3 4 5 6 Ordering Ordered Data > example(GpdModelling) Dirk Eddelbuettel Using R in Finance
  • 16. Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook portfolio (Enos, Kane et al) Cumulative Spread Return 20 Total return: −2.7 cap.usd Total return: 28 smi The portfolio Return (%) 10 0 package provides code −10 −20 Worst drawdown: −9 Worst drawdown: −− and data for real-life Mar May Jul Sep Nov Mar May Jul Sep Nov equity long/short portfolio Cumulative Quantile Return analysis. cap.usd smi The portfolioSim 30 quantile package adds simulation high Q9 Q8 support; the tradeCost Return (%) Q7 20 Q6 Q5 Q4 package analyses Q3 10 Q2 low ex-post trade impact, and 0 the backtest package Mar May Jul Sep Nov Mar May Jul Sep Nov permits to test portfolios. Date > example(backtest) Dirk Eddelbuettel Using R in Finance
  • 17. Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook PerformanceAnalytics (Carl and Peterson) Equity.Market.Neutral This package provides a 99% VaR 99 % ModVaR library of econometric 100 functions for 80 performance and risk analysis of financial 60 Density portfolios. It offers practioners and 40 researcher some of the latest research in 20 analysis of both normal 0 and non-normal return −0.010 −0.005 0.000 0.005 0.010 0.015 0.020 0.025 streams. Returns > example(chart.Histogram) Dirk Eddelbuettel Using R in Finance
  • 18. Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook Outline Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook Dirk Eddelbuettel Using R in Finance
  • 19. Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook Summary R is a very vibrant platform for data analysis, visualization and programming with data. Hence, R provides an excellent platform for academic research and teaching — as well as investment research and trading. Finance has traditionally been one of the two key users of the S language, and this constiuency has moved from S+ to R. The number of dedicated Finance packages for R is increasing as well, the R-Forge site is a good place to watch (http://R-Forge.R-Project.org). Dirk Eddelbuettel Using R in Finance
  • 20. Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook Outlook If you don’t go with R now, you will someday. – David Kane on r-sig-finance, 30 Nov 2004 Dirk Eddelbuettel Using R in Finance
  • 21. Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook R / Finance in April 2009 Dirk Eddelbuettel Using R in Finance
  • 22. Background About R and CRAN Finance Task View Selected Finance Packages Summary and Outlook Contact http://dirk.eddelbuettel.com dirk@eddelbuettel.com Dirk Eddelbuettel Using R in Finance