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Installment options and static hedging

Davis, Mark and Schachermayer, Walter and Tompkins, Robert G. (2001) Installment options and static hedging. Report Series SFB "Adaptive Information Systems and Modelling in Economics and Management Science", 67. SFB Adaptive Information Systems and Modelling in Economics and Management Science, WU Vienna University of Economics and Business, Vienna.

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Abstract

An installment option is a European option in which the premium, instead of being paid up-front, is paid in a series of installments. If all installments are paid the holder receives the exercise value, but the holder has the right to terminate payments on any payment date, in which case the option lapses with no further payments on either side. We discuss pricing and risk management for these options, in particular the use of static hedges to obtain both no-arbitrage pricing bounds and very effective hedging strategies with almost no vega risk. (author's abstract)

Item Type: Paper
Divisions: Departments > Finance, Accounting and Statistics > Statistics and Mathematics
Departments > Informationsverarbeitung u Prozessmanag. > Informationswirtschaft
Departments > Informationsverarbeitung u Prozessmanag. > Produktionsmanagement > Taudes
Departments > Marketing > Service Marketing und Tourismus
Depositing User: Repository Administrator
Date Deposited: 25 Mar 2002 12:09
Last Modified: 04 Aug 2015 01:29
URI: http://epub.wu.ac.at/id/eprint/1584

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