Stock Options as Barrier Contingent Claims

Jan Ericsson and Joel Reneby ()
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Joel Reneby: Dept. of Finance, Stockholm School of Economics, Postal: Stockholm School of Economics, Box 6501, 113 83 Stockholm, Sweden

No 137, Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: This paper contributes in two ways. First it extends the Geske (1979) compound option pricing model to the case where the underlying call is a down-and-out claim. Second it provides an internally consistent frame-work for valuing options on general corporate securities. Numerical results suggest that the detailed characteristics of the underlying capital structure (such as coupons, principal and maturities) may substantially influence the pricing of options.

Keywords: Compound barrier contingent claims; option pricing (search for similar items in EconPapers)
JEL-codes: G13 (search for similar items in EconPapers)
Date: Written
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Published in Applied Mathematical Finance, 2003, pages 121-147.

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Journal Article: Stock options as barrier contingent claims (2003)
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Persistent link: http://EconPapers.repec.org/RePEc:hhs:hastef:0137

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