Pricing, no-arbitrage bounds and robust hedging of installment options

Davis, Mark and Schachermayer, Walter and Tompkins, Robert G. (2000) Pricing, no-arbitrage bounds and robust hedging of installment options. Report Series SFB "Adaptive Information Systems and Modelling in Economics and Management Science", 65. 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, and also study a continuous-time limit in which premium is paid at a certain rate per unit time. (author's abstract)

Item Type:	Paper
Keywords:	option pricing / exotic options / stable hedging / replicating portfolios / no-arbitrage bounds
Classification Codes:	JEL C15, G13
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 10:51
Last Modified:	22 Oct 2019 00:41
URI:	https://epub.wu.ac.at/id/eprint/340

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