Making the best of best-of

Tristan Guillaume ()
Additional contact information
Tristan Guillaume: THEMA - Théorie économique, modélisation et applications - UCP - Université de Cergy Pontoise - Université Paris-Seine - CNRS - Centre National de la Recherche Scientifique

Post-Print from HAL

Abstract: This paper extends the analytical valuation of options on the maximum or the minimum of several risky assets in several directions. The first extension consists in including more assets in the payoff and making the latter more flexible by adding knock-in and knock-out provisions. The second extension consists in pricing these contracts in a multivariate jump-diffusion framework allowing for a stochastic two-factor term structure of interest rates. In both cases, explicit formulae are provided which yield prices quasi instantaneously and with utmost precision. Hedge ratios can be easily and accurately derived from these formulae.

Keywords: multiasset option; rainbow option; best-of option; option on the maximum or the minimum; dimension; multivariate normal distribution (search for similar items in EconPapers)
Date: 2008
Note: View the original document on HAL open archive server: https://hal.science/hal-00924256
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Published in Review of Derivatives Research, 2008, 11, pp.1-39

Downloads: (external link)
https://hal.science/hal-00924256/document (application/pdf)

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:hal:journl:hal-00924256

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().