R help - Nov 2008 - help for code in jump diffusion

hello everyone ,
i have written some code in R for jump diffusion model.
the code generates answer as 
" NaN 
There were 50 or more warnings (use warnings() to see the first 50)"
my code is 

mu<-0.2
sig<-0.2
S0<-100
j<-0.2
dt<-1/252
int<-0.1
i<-0
while(i<=1)
{
  is.nan
  k<-rnorm(1,0,1)
  theta<-ifelse((k<(int*dt)),1,0)
  m<-rnorm(1)
  gam<-qnorm(m,0,1)
  S0<-abs(S0*((1+mu*dt+sig*sqrt(dt)+ gam)- j*theta))
  if(!is.nan (S0 <= 0))
     warning("S0 must be positive")
     cat("NaN","\n")
  cat(S0,"\n")
  i<-i+(1/252)
}

the problem i am facing is i am not able to find out the reason for this NaN
output.
please help 

thanks in advance.



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i tried to run your code, this is how/why you got NaN:
> mu<-0.2
> sig<-0.2
> S0<-100
> j<-0.2
> dt<-1/252
> int<-0.1
> i<-0
>  is.nan
function (x)  .Primitive("is.nan")
>  k<-rnorm(1,0,1)
>  k
[1] 0.3214954
>  theta<-ifelse((k<(int*dt)),1,0)
>  theta
[1] 0
>  m<-rnorm(1)
>  m
[1] -0.4525731
>  gam<-qnorm(m,0,1)
Warning message:
In qnorm(p, mean, sd, lower.tail, log.p) : NaNs produced
>  gam
[1] NaN
>  S0<-abs(S0*((1+mu*dt+sig*sqrt(dt)+ gam)- j*theta))
>  S0
[1] NaN
>  if(!is.nan (S0 <= 0))
+     warning("S0 must be positive")
Warning message:
S0 must be positive
>     cat("NaN","\n")
NaN
>  cat(S0,"\n")
NaN
>


On Sat, Nov 22, 2008 at 2:37 PM, subbudas <subratdas0407sssu at gmail.com>
wrote:
>
> hello everyone ,
> i have written some code in R for jump diffusion model.
> the code generates answer as
> " NaN
> There were 50 or more warnings (use warnings() to see the first 50)"
> my code is
>
> mu<-0.2
> sig<-0.2
> S0<-100
> j<-0.2
> dt<-1/252
> int<-0.1
> i<-0
> while(i<=1)
> {
>  is.nan
>  k<-rnorm(1,0,1)
>  theta<-ifelse((k<(int*dt)),1,0)
>  m<-rnorm(1)
>  gam<-qnorm(m,0,1)
>  S0<-abs(S0*((1+mu*dt+sig*sqrt(dt)+ gam)- j*theta))
>  if(!is.nan (S0 <= 0))
>     warning("S0 must be positive")
>     cat("NaN","\n")
>  cat(S0,"\n")
>  i<-i+(1/252)
> }
>
> the problem i am facing is i am not able to find out the reason for this
NaN
> output.
> please help
>
> thanks in advance.
>
>
>

On Fri, 2008-11-21 at 22:37 -0800, subbudas wrote:
> hello everyone ,
> i have written some code in R for jump diffusion model.
> the code generates answer as 
> " NaN 
> There were 50 or more warnings (use warnings() to see the first 50)"
> my code is 
> 
> mu<-0.2
> sig<-0.2
> S0<-100
> j<-0.2
> dt<-1/252
> int<-0.1
> i<-0
> while(i<=1)
> {
>   is.nan
>   k<-rnorm(1,0,1)
>   theta<-ifelse((k<(int*dt)),1,0)
>   m<-rnorm(1)
>   gam<-qnorm(m,0,1)
>   S0<-abs(S0*((1+mu*dt+sig*sqrt(dt)+ gam)- j*theta))
>   if(!is.nan (S0 <= 0))
>      warning("S0 must be positive")
>      cat("NaN","\n")
>   cat(S0,"\n")
>   i<-i+(1/252)
> }
> 
> the problem i am facing is i am not able to find out the reason for this
NaN
> output.
> please help 
> 
> thanks in advance.

Hi 

I see two problems in your script:

1- m<-rnorm(1) will produce a random number with distribution normal
mean =0 and sd=1 so m can >1 or <0
In this cases gam<-qnorm(m,0,1) is NAN because m is not a probability

2- I think  if(!is.nan (S0 <= 0)) ...  is wrong 


Try this script :


mu<-0.2
sig<-0.2
S0<-100
j<-0.2
dt<-1/252
int<-0.1
i<-0
while(i<=1){
	k<-rnorm(1,0,1)
	theta<-ifelse((k<(int*dt)),1,0)
#	m<-rnorm(1)
	m<-runif(1,0,1)
	gam<-qnorm(m,0,1)
	S0<-abs(S0*((1+mu*dt+sig*sqrt(dt)+ gam)- j*theta))
	if(!is.nan(S0)&&(S0 <= 0)){
		warning("S0 must be positive")
		cat("NaN","\n")
	}
	cat(S0,"\n")
	i<-i+(1/252)
}

-- 
Bernardo Rangel Tura, M.D,MPH,Ph.D
National Institute of Cardiology
Brazil