Numerical Evaluation of Multivariate Contingent Claims

Phelim P Boyle, Jeremy Evnine and Stephen Gibbs

The Review of Financial Studies, 1989, vol. 2, issue 2, 241-50

Abstract: We develop a numerical approximation method for valuing multivariate contingent claims. The approach is based on an n-dimensional extension of the lattice binomial method. Closed-form solutions for the jump probabilities and the jump amplitudes are obtained. The accuracy of the method is illustrated in the case of European options when there are three underlying assets. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

Date: 1989
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