Instalment Options: A Closed-Form Solution and the Limiting Case

Susanne Griebsch (), Christoph Kühn () and Uwe Wystup ()
Additional contact information
Susanne Griebsch: Frankfurt School of Finance & Management
Christoph Kühn: Goethe-University Frankfurt, Frankfurt MathFinance Institute
Uwe Wystup: Frankfurt School of Finance & Management

A chapter in Mathematical Control Theory and Finance, 2008, pp 211-229 from Springer

Abstract: Summary In Foreign Exchange Markets Compound options (options on options) are traded frequently. Instalment options generalize the concept of Compound options as they allow the holder to prolong a Vanilla Call or Put option by paying instalments of a discrete payment plan. We derive a closed-form solution to the value of such an option in the Black-Scholes model and prove that the limiting case of an Instalment option with a continuous payment plan is equivalent to a portfolio consisting of a European Vanilla option and an American Put on this Vanilla option with a time-dependent strike.

Keywords: Exotic; Options (search for similar items in EconPapers)
Date: 2008
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-540-69532-5_12

Ordering information: This item can be ordered from
http://www.springer.com/9783540695325

DOI: 10.1007/978-3-540-69532-5_12

Access Statistics for this chapter

More chapters in Springer Books from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().