'x' has to be an array of at least two dimensions - r

Question

I have been trying to price knock-in and knock-out options, but I have a problem I can't seem to solve:
when coding the knock-in option, with the code:
knockInOptionMC <- function( Type = c('Call','Put'), Type2 = c('Down In', 'Up In'), P, T., r, K, B){
if(Type2 == 'Down In'){
knockedIn <- P < B
}else{
knockedIn <- P > B
}
alive <- colSums(knockedIn) == 1
PT <- tail(P,1)
if(Type == 'Call'){
payoff <- ( PT > K ) * (alive) * ( PT - K )
}else{
payoff <- ( PT < K ) * (alive) * ( K - PT )
}
simulatedPayoff <- exp( -r * T. ) * payoff
return( mean(simulatedPayoff) )
}
knockInOptionMC('Put','Down In', P, T., r, K = 105 , B = 105)
I get no error, but when I try to do the same thing for the knock out, with the following code:
knockOutOptionMC <- function( Type = c('Call','Put'), Type2 = c('Down Out', 'Up Out'), P, T., r, K, B){
if(Type2 == 'Down Out'){
knockedOut <- P < B
}else{
knockedOut <- P > B
}
alive <- colSums(knockedOut) == 0
PT <- tail(P,1)
if(Type == 'Call'){
payoff <- ( PT > K ) * (alive) * ( PT - K )
}else{
payoff <- ( PT < K ) * (alive) * ( K - PT )
}
simulatedPayoff <- exp( -r * T. ) * payoff
return( mean(simulatedPayoff) )
}
knockOutOptionMC( 'Put','Up Out', T., r, K = 105, B = 95 )
I get the error 'x' has to be an array of at least two dimensions in the object colsums.
why why why do I get the error since they're basically the same thing?
thank you sm

Answer 1

The error likely comes from the colSums() line - which needs its argument to be two-dimensional to have columns.
The core of the problem is not in the function, but how you call them:
knockInOptionMC ('Put', 'Down In', P, T., r, K = 105, B = 105)
knockOutOptionMC('Put', 'Up Out', T., r, K = 105, B = 95 )
So you are likely passing a two-dimensional variable P in the first case, but missing it in the second, and pass a one-dimensional T. instead.
Chances are that the function run successfully in case 2 because you have the missing variables defined in the parent environment.