Decomposition of the n-fold compound option

Liesbeth Thomassen, Jan van Casteren and Martine van Wouwe

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

Abstract: In a previous paper by Thomassen and Van Wouwe [5] the notion of an n-fold compound option was introduced as a generalization of Geske’s compound option [3]. To compute such an n-fold numerically remains possible but tedious because most algorithms are not capable to compute multivariate normal CDF’s for higher dimensions (n >= 3). For that reason a proof to regard an n-fold as an (n-k)-fold on a k-fold is given and allows for example to decompose a 6-fold compound option into a 2-fold and a 4-fold.

Keywords: Financial; N-fold compound options (search for similar items in EconPapers)
Pages: 12 pages
Date: 2002-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ant:wpaper:2002040

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