We discuss the use of R a free software environment for statistical computing and graphics in teaching financial mathematics and statistics. R can be used to demonstrate the ideas behind Brownian motion geometric Brownian motion and stochastic integration and to explore the dependence of the price of a financial product called a European option on other quantities such as the interest rate. The option price can also be estimated using a Monte Carlo approach and we discuss how R can be employed to illustrate features of this Monte Carlo methodology. Throughout we show how R can be used to provide insights into various financial and statistical concepts introduce a variety of relevant R packages and provide suggestions for further R related work.
