Connecting discrete and continuous path-dependent options
dc.contributor.author | Glasserman, Paul | en_US |
dc.contributor.author | Broadie, Mark | en_US |
dc.contributor.author | Kou, S. G. | en_US |
dc.date.accessioned | 2006-09-08T20:13:34Z | |
dc.date.available | 2006-09-08T20:13:34Z | |
dc.date.issued | 1999-01 | en_US |
dc.identifier.citation | Broadie, Mark; Glasserman, Paul; Kou, S.G.; (1999). "Connecting discrete and continuous path-dependent options." Finance and Stochastics 3(1): 55-82. <http://hdl.handle.net/2027.42/42332> | en_US |
dc.identifier.issn | 0949-2984 | en_US |
dc.identifier.uri | https://hdl.handle.net/2027.42/42332 | |
dc.description.abstract | This paper develops methods for relating the prices of discrete- and continuous-time versions of path-dependent options sensitive to extremal values of the underlying asset, including lookback, barrier, and hindsight options. The relationships take the form of correction terms that can be interpreted as shifting a barrier, a strike, or an extremal price. These correction terms enable us to use closed-form solutions for continuous option prices to approximate their discrete counterparts. We also develop discrete-time discrete-state lattice methods for determining accurate prices of discrete and continuous path-dependent options. In several cases, the lattice methods use correction terms based on the connection between discrete- and continuous-time prices which dramatically improve convergence to the accurate price. | en_US |
dc.format.extent | 241524 bytes | |
dc.format.extent | 3115 bytes | |
dc.format.mimetype | application/pdf | |
dc.format.mimetype | text/plain | |
dc.language.iso | en_US | |
dc.publisher | Springer-Verlag; Springer-Verlag Berlin Heidelberg | en_US |
dc.subject.other | Legacy | en_US |
dc.subject.other | Key Words: Barrier Options, Lookback Options, Continuity Corrections, Trinomial Trees JEL Classification: G13, C63, G12 Mathematics Subject Classification (1991): 90A09, 60J15, 65N06 | en_US |
dc.title | Connecting discrete and continuous path-dependent options | en_US |
dc.type | Article | en_US |
dc.subject.hlbsecondlevel | Economics | en_US |
dc.subject.hlbtoplevel | Business | en_US |
dc.description.peerreviewed | Peer Reviewed | en_US |
dc.contributor.affiliationum | Department of Statistics, University of Michigan, Ann Arbor, MI 48109–1027, USA (e-mail: kou@umich.edu), US | en_US |
dc.contributor.affiliationother | Graduate School of Business, Columbia University, New York, NY 10027, USA, US | en_US |
dc.contributor.affiliationother | Graduate School of Business, Columbia University, New York, NY 10027, USA, US | en_US |
dc.contributor.affiliationumcampus | Ann Arbor | en_US |
dc.description.bitstreamurl | http://deepblue.lib.umich.edu/bitstream/2027.42/42332/1/780-3-1-55_90030055.pdf | en_US |
dc.identifier.doi | http://dx.doi.org/10.1007/s007800050052 | en_US |
dc.identifier.source | Finance and Stochastics | en_US |
dc.owningcollname | Interdisciplinary and Peer-Reviewed |
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