A simple method for generalized sequential compound options pricing

作者：Wang, Xiandong^*; He, Jianmin

来源：Mathematical Social Sciences, 2017, 87: 85-91.

DOI：10.1016/j.mathsocsci.2017.03.001

• VALUATION
• BIVARIATE
• AMERICAN
• INVESTMENTS
• COMPUTATION
• MODEL

This paper presents a new and simple method to derive the pricing formula for generalized sequential compound options (SCOs). Multi-fold generalized SCOs are defined as compound options on (compound) options, where the call/put property of each fold can be arbitrarily assigned. To obtain the analytic pricing formula for n-fold generalized SCOs, we prove and generalize a mathematical expectation related to multivariate normal variables, which are potentially very useful in pricing many types of option. Subsequently, with the help of the proven conclusions, the n-fold generalized SCOs pricing formulas for the diffusion model and the log-normal jump-diffusion model are derived. Finally, some possible computational methods for the calculation of SCOs price are presented.

• 出版日期2017-5
• 单位东南大学; 常州工学院