A Generalization of the Formulas for Options on the Maximum or the Minimum of Several Assets

This paper generalizes the option on the maximum or the minimum of two assets (several assets) within a stochastic interest rate framework. A Gaussian model is used to describe the interest rates. Closed-form solutions for the market values are presented. The use of the options is illustrated with n...

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Bibliographic Details
Published in:The European journal of finance 2006-12, Vol.12 (8), p.717-730
Main Author: Lindset, Snorre
Format: Article
Language:English
Subjects:
and Morton term structure of interest rates
Assets
Finance
Heath
Interest rates
Jarrow
Multivariate analysis
multivariate probabilities
Normal distribution
Options markets
Options on maximum or minimum of several assets
Options on stocks
Probability
Stochastic models
Studies
Term structure
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Description
Summary:This paper generalizes the option on the maximum or the minimum of two assets (several assets) within a stochastic interest rate framework. A Gaussian model is used to describe the interest rates. Closed-form solutions for the market values are presented. The use of the options is illustrated with numerical examples.
ISSN:1351-847X
1466-4364
DOI:10.1080/13518470500392876