The n-fold compound option

Liesbeth Thomassen and Martine van Wouwe ()

Working Papers from University of Antwerp, Faculty of Business and Economics

Abstract: This paper revisits the compound options as introduced by R. Geske (2). Geske presented a theory for pricing an option on an option which he defined as a compound option. He developed a closed form expression for this kind of options. In this paper we will extend the notion of compound option to the n-fold compound option or compound option of order n. Moreover an interesting relationship between a k=variante normal distribution function and a (k + 1)-variante normal distribution function is proved for this intention.

Keywords: Financial; N-fold compound options; Multivariate normal CDF (search for similar items in EconPapers)
Pages: 16 pages
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:ant:wpaper:2001041

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