Hi all, I am at Section 5 Deflators – Hands On 2 right now where I’m stuck as I am unable to reconcile my real-world assumption Call price against that in the module. What I calculated was 336.93 whereas the module result was 321.1. I was able to get the same risk-neutral result, so I’m pretty sure the problem is not due to the code for the function… Does anyone face same issue as me? Below are my codes. Appreciate any help on this. Thanks.

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`{r input data}

s0 = 2500

mu = 0.10 #real-world

r = 0.05

sigma = .15 #real-world

sigma.rn <- 0.2 #risk-neutral

T = 1

N = 500

K = 2500

M <- T * 12

t <- 1/12

Call.T = 5 #year

d=0

`

## Generate N scenarios under real-world assumption

Call the equityModelingRW.LN.inputSamples function to generate N economic scenarios under real-world assumption

` {r generate N economic scenarios using RW assumption}

set.seed(1)

sampleValues.rw = matrix(rnorm((M*N), m=(mu*t), sd=(sigma*sqrt(t))), M, N)

St.rw = equityModelingRW.LN.inputSamples(s0, T, N, sampleValues.rw)

`

## Estimate Call prices under real-world assumptions

` {r calculate estimated Call prices}

callPrices.rw <- CallPriceCalculation(St.rw, K, r, T, N)

CallPriceEstimates(callPrices.rw)

`

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