کد مقاله | کد نشریه | سال انتشار | مقاله انگلیسی | نسخه تمام متن |
---|---|---|---|---|
482785 | 1446229 | 2006 | 10 صفحه PDF | دانلود رایگان |
![عکس صفحه اول مقاله: A dynamic programming approach to price installment options A dynamic programming approach to price installment options](/preview/png/482785.png)
Installment options are Bermudan-style options where the holder periodically decides whether to exercise or not and then to keep the option alive or not (by paying the installment). We develop a dynamic programming procedure to price installment options. We study in particular the geometric Brownian motion case and derive some theoretical properties of the IO contract within this framework. We also characterize the range of installments within which the installment option is not redundant with the European contract. Numerical experiments show the method yields monotonically converging prices, and satisfactory trade-offs between accuracy and computational time. Our approach is finally applied to installment warrants, which are actively traded on the Australian Stock Exchange. Numerical investigation shows the various capital dilution effects resulting from different installment warrant designs.
Journal: European Journal of Operational Research - Volume 169, Issue 2, 1 March 2006, Pages 667–676