Sensitivity of mountain range options prices

Krzysztof Echaust and Marcin Bartkowiak

International Journal of Bonds and Derivatives, 2016, vol. 2, issue 2, 87-107

Abstract: Mountain range options are a particular class of multi-asset options for which no closed form formula for valuation exists and Monte Carlo simulation should be used. In this paper, we conducted an analysis of the sensitivity of mountain range options prices to changes in various risk factors, such as correlation coefficients, underlying prices, volatilities, risk-free rate, and time to expiration. We found numbers of non-typical and nonlinear dependencies in options valuation.

Keywords: mountain range options; sensitivity; structured products; Altiplano; Atlas; Everest; Himalaya; Kilimanjaro; options prices; multi-asset options; options valuation; Monte Carlo simulation; risk factors; correlation coefficients; underlying prices; volatility; risk-free rate; time to expiration. (search for similar items in EconPapers)
Date: 2016
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