Worst Case Pricing of Rainbow Options

Jürgen Topper

Hannover Economic Papers (HEP) from Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät

Abstract: Options on two underlyings are a common exotic product in the equity and FX derivatives market. The value of these kinds of options depends on the correlation of the two underlyings. We will present a model to compute a lower bound for the price of this option. The model, represented by a non-linear parabolic PDE, is implemented with finite elements in order to demonstrate the results with several derivatives from the European market.

JEL-codes: C63 G13 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2001-10
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Citations: View citations in EconPapers (1)

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